Contracts for Difference draft strike prices

Posted on 27 June 2013

Today, the Department of Energy and Climate Change announced the proposed strike prices that will be available from 2014 – 2019 for renewable electricity including onshore and offshore wind, tidal, wave, biomass conversion and large solar projects. This support comes from within the £7.6 billion Levy Control Framework, as previously announced.

Strike Prices effectively remove price volatility risk for electricity generated from low-carbon sources, under new long-term CfDs being established by the Energy Bill. This ensures greater certainty to generators and therefore a better deal to consumers.

They form a core component of the Government’s strategy to bring forward investment in affordable low-carbon electricity generation – including renewables, Carbon Capture and Storage and new nuclear.

CfDs are vital to give investors the confidence they need to pay the up-front costs of major new infrastructure projects, and will help ensure that renewable energy makes up more than 30% of the UK’s electricity mix in 2020, helping to significantly decarbonise the power sector by 2030.

These prices are broadly comparable to the support levels available under the Renewables Obligation, with a number of adjustments to account for the benefits of CfDs.

CfDs will make it cheaper to deliver low-carbon generation by around £5 billion up to 2030, because they will deliver cost of capital reductions that cannot be achieved through existing policy instruments.