Contracts for Difference


Low Carbon Contracts Company (LCCC)

LCCC was established to be the counterpart to Contracts for Difference, a new incentive designed by Government to bring forward the investment needed to sustainably deliver the UK’s goals for renewable and other low carbon electricity. Its mission is to build confidence in electricity market reform through effective commercial delivery and continuous improvement. 

Contracts for Difference (CFD)

LCCC’s primary role is to manage CFDs with low carbon generators throughout their lifetime, which involves management of the contracts as well as the Supplier Obligation Levy that funds CFD payments. Critical to these functions is power price forecasting and settlement activities. In all of its operations, LCCC is led by its guiding principle to “maintain investor confidence in the CFD scheme and minimise costs to consumers”.

On the LCCC website there is a register of Contracts for Difference . Some examples of these contracts are given below. Most significant existing contracts are for biomass and offshore wind production. There is one contract for future nuclear generation at Hinkley Point. The "Strike Price" of this Hinkley Point contract has been used by opponents of nuclear power as an argument that nuclear generation is expensive compared to renewable energy, however it can be seen that the Hinkley Point strike price currently at £102/MWh is much lower than many of the offshore wind contracts which range up to £170/MWh and also is less than the the biomass contracts around £115/MWh.

The payments to electricity suppliers are provided on the LCCC website. The plot below show the situation up to the end of 2019. In can be seen that the major part of the subsidies go to the offshore wind industry.