Energy Bill - Not A Contract: So What’s The Difference?

The draft Energy Bill published on 22 May provides an overview of the Government's plans to promote investment in nuclear, carbon capture and storage and renewable energy but leaves key questions unanswered. In particular, will Government plans for a new statutory form of 'Contract for Difference' (CfD) overcome industry scepticism and EU state aid scrutiny?

The technical supplement issued with the draft Energy Bill explains: 'CfDs are instruments that provide long term revenue certainty to investors in low carbon generation (eg carbon capture and storage, renewable and nuclear energy). Generators will receive the price they achieve in the electricity market plus a 'top up' to an agreed level (the "strike price") from the reference price. Where the market price is above the agreed level, the generator would be required to pay back and thus ensure value for money and price stability for consumers.'