Update confirms Contracts for Difference regime should deliver payments to energy suppliers from renewables generators. The Contracts for Difference (CfD) scheme will see renewable energy generators paying money back to electricity suppliers for the first time as part of reconciliation process triggered by the high wholesale power prices experienced in recent months. The CfD scheme that has been widely credited in driving a rapid expansion in renewable energy capacity in the UK is designed so that clean power generators with contracts receive top-up payments above the level of wholesale prices so as to provide them with a guaranteed ‘strike price’. The approach provides developers with price certainty over the course of the contract and as such serves to de-risk investments. However, the contracts are two-way arrangements and as such generators pay money back when market prices rise beyond their strike price. Advocates of the approach argue that it delivers a balance between providing investors with the confidence they need to fund the growth of the renewables market and providing a ‘hedge’ for consumers during periods such as the current gas crisis, when wholesale energy prices soar.
Business Green 17th Jan 2022 read more »