CFDs provide long-term price stabilisation to low carbon plant, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers.
CFDs require generators to sell energy into the market as usual but, to reduce exposure to fluctuating electricity prices and provide a variable top-up from the market price to a pre-agreed ‘strike price’.
Contracts For Difference (Podcast Episode 70)
At times when the market price exceeds the strike price, the generator is required to pay back the difference, thus protecting consumers from over-payment.
These documents set out the various stages of development and the final standard terms and conditions of the CFD. An update to the contract was published in draft on 8 February 2017.