Contract for Difference (CfD) was introduced in UK in October 2014 aiming to replace Renewable Obligations system in the UK. CfD scheme is designed to support deployment of large scale renewable projects (more than 5MW).
The CfD is based on a difference between the market price and an agreed “strike price”.
If the “strike price” is higher than a market price, the CfD Counterparty must pay renewable generator the difference between the “strike price” and the market price. If the market price is higher than the agreed “strike price”, renewable generator must pay back the CfD Counterparty the difference between the market price and the “strike price”.
CfDs are concluded between the renewable generator and Low Carbon Contracts Company (LCCC), a government-owned company.
CfD contracts are awarded for period of 15 years.
Generators that want to participate in the CfD scheme must participate in allocation rounds.
Technologies eligible to participate in the CfD scheme are: onshore and offshore wind, solar PV, geothermal parts, hydropower, ocean power (tidal and wave), lnadfill gas, sewage gas, anaerobic digestion, biogas, biomass and CHP plants.
The CfD scheme is currently in place in Great Britain only. Until 31 March 2017, RES-E generators are able to choose between Renewables Obligation (RO) and CfD schemes. From April 2017 the CfD scheme will be the only support scheme for all new RES-E plants over 5MW.