Support for low carbon power

This briefing covers background to the contract for difference mechanism for supporting low carbon power.

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.