Energy Bill - Low Carbon Generation

CFDs are due to replace the Renewables Obligation as the primary support mechanism for major new renewable energy generation and will also be available for other forms of low carbon generation such as nuclear and fossil fuel plant with carbon capture and storage (CSS). In an attempt to reduce project delays pending implementation of the legislative framework for CFDs, the Bill also makes provision for "investment contracts" directly between the Secretary of State and generators.

Feed-in Tariff Contracts for Differences

In their simplest form CFDs will adjust the income received by generators from electricity sales by providing for payments in respect of the difference between the CFD strike price and a market reference price to be made between the generator and suppliers. If the market reference price is higher than the strike price the generator pays the difference in respect of its output, where it is lower the generator receives the difference. In principle