A Contract for Difference (CFD) is a private law contract
between a low carbon electricity generator and the Low Carbon
Contracts Company (LCCC), a government-owned company. A generator
party to a CFD is paid the difference between the 'strike price' -
a price for electricity reflecting the cost of investing in a
particular low carbon technology - and the 'reference price'- a
measure of the average market price for electricity in the GB
market. It gives greater certainty and stability of revenues to
electricity generators by reducing their exposure to volatile
wholesale prices, whilst protecting consumers from paying for
higher support costs when electricity prices are high.
Further detials on CfD on the Gov.UK website can be
found here.
The Low Carbon Contracts Company can be accessed here.