Contracts for Difference (CfD)—key features

Produced in partnership with Matthew Brown and Sabrina Polito of CMS Cameron McKenna Nabarro Olswang LLP

Practice notes

Contracts for Difference (CfD)—key features

Produced in partnership with Matthew Brown and Sabrina Polito of CMS Cameron McKenna Nabarro Olswang LLP

Practice notes

What is Electricity Market Reform (EMR) and how does it relate to the CfD regime?

The EMR programme was developed by the government to promote investment in secure forms of capacity and affordable low carbon energy generation.

The key mechanisms implemented through the EMR reforms were:

•
the Contracts for Difference (CfD) regime, which is the subject matter of this Practice Note and takes the form of a contract providing owners of new build low carbon generation projects with a long-term stable income stream in respect of the electricity they generate when their plant is in operation
•
the Capacity Market (CM) regime, which provides a regular payment/retainer to reliable forms of electricity capacity (in the form of generation plant, electricity storage (such as batteries), reduction in electricity demand and international interconnection wires), in return for such capacity being available when the system needs that electricity to ensure security of supply. See Practice Note: Capacity Market—key features
•
the Carbon Price Floor, originally implemented to support

Matthew Brown

Matthew is a Senior Associate in the Energy, Projects and Construction Group at CMS. He has a track record of advising government, regulators, network companies, developers and investors on energy sector regulation, renewables, and wider transactions in the energy sector.

Sabrina Polito

Solicitor, CMS Cameron McKenna Nabarro Olswang LLP

Sabrina is an associate in the Energy & Climate Change Team and has broad experience in advising industry bodies, investors, generators, suppliers and networks in relation to a range of matters including projects, transactions, commercial arrangements and regulatory compliance in the UK and internationally. She has a particular interest in clean energy, emerging technologies and digitalisation of the energy sector.

Sabrina has also completed secondments with EDF Renewables and National Grid plc.

Jurisdiction(s):

United Kingdom

Key definition:

Contracts for Difference definition

What does Contracts for Difference mean?

The Contracts for Difference (CfD) scheme is the primary mechanism for supporting low-carbon electricity generation in the UK, via a private law contract between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), which provides long term revenue stabilisation for low carbon generation.

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