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Contracts For Difference (CDF)

Contracts for Difference is a funding mechanism created to support new low-carbon energy generation capacity in the UK.

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What Are Contracts for Difference (CFD)?

The Contracts for Difference scheme was created as part of the UK government’s Electricity Market Reform programme. The Contracts for Difference scheme is aimed to create a mechanism which promotes investment into low-carbon electricity generation in the UK without significantly increasing the costs of energy bills.

The UK energy market is fairly volatile and market predictability is hard to achieve, resulting in investments in low-carbon electricity generation being unattractive to investors. To offer certainty to investors, the Contracts for Difference scheme was created to offer a minimum price for the electricity generated.

Contracts for Difference was introduced in 2014 and replaced the Renewable Obligation.

The Renewable Obligation was also an incentive scheme for large-scale renewable energy generation that placed an obligation on energy suppliers to buy Renewable Obligation Certificates. The Renewable Obligation is still operating for those renewable energy generators that signed up to the scheme before it closed as the payments are guaranteed for the length of the agreed period for that technology.

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