This briefing covers background to the contract for difference mechanism for supporting low carbon power.
Support for low carbon power (180 KB , PDF)
The Government’s primary mechanism for supporting new low carbon power infrastructure is known as the contract for difference (CfD) scheme.
CfDs work by guaranteeing a set price for electricity – known as a strike price – that generators receive per unit of power output. As the wholesale price of electricity fluctuates, the generator is either paid a subsidy, or pays back, so that they always receive the value of the strike price. The cost, or benefit, is passed on to consumer bills.
The technologies that have been able to compete for CfDs have been subject to policy changes. The Government has announced a consultation on changes to the CfD scheme, which would mean a wider mix of technologies, including onshore wind, will be able to compete for contracts.
Support for low carbon power (180 KB , PDF)
The Water Bill was introduced in the House of Commons on 16 October 2024, and its second reading took place on 28 March 2025. The second reading debate was adjourned, and is scheduled to continue on 4 July 2025, if there is time in the sitting. The Library briefing provides an overview of the bill and background information.
Typical household energy bills increased by 54% in April 2022 and 27% in October 2022. Lower wholesale prices have led to falls in prices, but current bills are still 43% above their winter 2021/22 levels.
A debate has been scheduled for 1 July on regulatory powers over billing of energy supply to businesses. The subject has been chosen by the Back Bench Business Committee and the debate will be opened by Sarah Edwards MP.
