Contracts for Difference (CfDs) is intended to provide long-term revenue stabilisation to low-carbon Generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers.
CfDs support new investment in a wide-range of low-carbon generation and have been designed to provide efficient and cost-effective revenue stabilisation for new generation by reducing exposure to the volatile wholesale electricity price, as well as encouraging competition as the UK makes the transition to a low-carbon generation mix.
CfDs require Generators to sell energy into the market as usual but, to reduce this exposure to electricity prices, CfDs provide a variable top-up from the market price to a pre-agreed 'strike price'. At times of high market prices, these payments reverse and the Generator is required to pay back the difference between the market price and the strike price, thus protecting consumers from overpayment.
The CfD is implemented through a bilateral contract between the Generator and the Low Carbon Contracts Company (LCCC).
National Grid is the Delivery Body for Electricity Market Reform (EMR). Our responsibilities in delivering the regime include:
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