Climate Change & the Environment

Contracts for Difference

In UK most generators of renewable electricity (and some nuclear stations) contract with the contacts with the Low Carbon Contracts Company, which is wholly owned by UK Government, using Contracts for Difference (CfDs). Under a CfD a buyer and a seller agree on a strike price and the buyer pays the seller the difference between the current wholesale price and the strike price. The generators get the wholesale price from the Electricity System Operator (ESO) and if it is below the strike price then they get a top-up from LCCC, and if it is above the strike price then they pay back.