Contract for difference (CFD) meaning

In this issue: Electricity and gas market regulation and licensing Networks and grid connections Renewable energy Capacity Market, balancing services and system flexibility Air emissions, efficiency and climate change International energy Daily and weekly news alerts New and updated content Dates for your diary Trackers Energy resources on Lexis+® Electricity and gas market regulation and licensing DESNZ has opened a consultation to strengthen Energy Ombudsman (EO) powers. It will concentrate on complaints from domestic energy suppliers, small enterprise complaints against non-domestic suppliers, and heat network complaints. Electricity and gas networks and third-party intermediaries will instead be consulted on separately. The plans include shortening the escalation period for complaints from eight to four weeks, allowing automatic compensation where EO decisions are not put into effect promptly, and granting the EO a statutory designation. DESNZ has also stated that Ofgem will regulate third‑party intermediaries, including energy brokers and price comparison sites, which have previously operated...

In this issue: Air emissions and climate change Energy efficiency of products Energy for environmental lawyers Environmental disputes and proceedings Environmental information Environmental permits and consents ESG and sustainability Nature, biodiversity and habitat conservation Waste Water, flooding and drainage Daily and weekly news alerts New and updated content Air emissions and climate change DESNZ publishes independent review on greenhouse gas removals The Department for Energy Security and Net Zero (DESNZ) has released the Independent Review of Greenhouse Gas Removals (GGRs), led by Dr Alan Whitehead CBE, evaluating how removal technologies could support the UK in meeting its 2050 net-zero ambition. See: LNB News 23/10/2025 6. UK ETS Authority launches consultation on aviation free allocation end and regional connectivity The UK Emissions Trading Scheme (UK ETS) Authority is currently consulting on the potential implications of ending aviation free allocation in 2026 for regional connectivity. It considers whether further action is...

The UK remains the global frontrunner in offshore wind, with 5GW already operating and a goal of 10GW of installed capacity by 2020. The scale of schemes is growing steadily, helping to capture significant economies of scale. For example, in February 2016 DONG Energy announced plans to proceed with construction of the 1.2GW Hornsea Project One offshore wind farm, set to become the world’s largest offshore wind farm (and expected to use Siemens 7MW turbines). The UK’s referendum decision to leave the EU has sent shockwaves through political and investment communities. Regarding offshore wind, ministers rapidly signalled after the vote their intention to maintain investment in clean energy, including offshore wind. For instance, on 29 June 2016 Amber Rudd, then Secretary of State for Energy and Climate Change, stressed the ongoing intention to bring forward more offshore wind, subject to further cost reductions (as before). However, as new ministers take office, industry is urging the newly constituted Department for Business, Energy and Industrial Strategy (BEIS) to restate the previous government’s...

Industry bodies Body Description Electricity Settlements Company Ltd (ESC) The ESC serves as the Capacity Market Settlement Body, handling capacity payments to, and penalty payments from, participants supported by the Capacity Market. It also oversees the inflows from licensed electricity suppliers that underpin these disbursements. Appointed under the Capacity Regulations (SI 2014/2043, reg 80), the ESC is wholly owned by DESNZ, which, from 7 February 2023, took over the energy portfolio of the former Department for Business, Energy and Industrial Strategy (BEIS), now dissolved. Its relationship with its sole shareholder—the Secretary of State for Energy Security and Net Zero (SoS), previously the Secretary of State for BEIS—is defined by a Framework Document. In practice, the ESC shares an office, website, and senior officers with the Low Carbon Contracts Company Ltd (LCCC), the counterparty to the low carbon Contract for Difference (CfD) mechanism. LCCC is discussed further in Practice Note: Industry Bodies and Codes—Renewable Energy. ELEXON Limited (ELEXON) ELEXON oversees wholesale electricity balancing and settlement...

For a fuller analysis of the regulation, consenting and incentivisation of the net zero energy transition under the laws of England and Wales, see also: Collinson and Hockman on Energy Law: Regulating, Consenting and Incentivising the Energy Transition. That textbook offers comprehensive treatment of the topics addressed in this Practice Note, with in‑depth discussion of the same issues. What is the background to the CfD regime? Contracts for Difference sit at the heart of the government’s Electricity Market Reform (EMR) programme, introduced in 2013. EMR was devised by the UK government to encourage investment in secure capacity and affordable, low‑carbon electricity generation. The principal mechanisms enacted through the EMR reforms include: the Contracts for Difference (CfD) regime, the focus of this Practice Note, structured as a contract that grants owners of new build low‑carbon generation projects a long‑term, stable revenue stream in respect of the electricity they generate while their plant is in operation the Capacity Market (CM) regime, which provides a regular...

Industry bodies Body Description The ESC serves as the Capacity Market Settlement Body, overseeing the distribution of capacity payments and the collection of penalties from recipients supported by the Capacity Market. It acts as the Capacity Market ‘Settlement Body’. It also manages, in that capacity, the sums received from licensed electricity suppliers that finance the payments the ESC makes to those Capacity Market beneficiaries. Those supplier receipts underpin the ESC’s outgoing payments. The ESC was designated under the Electricity Capacity Regulations 2014, SI 2014/2043, reg 80, and is a company wholly owned by DESNZ. Its relationship with its sole shareholder—the Secretary of State for Energy Security and Net Zero (SoS)—is set out in a Framework Document. Operationally, ESC shares premises, a website and senior leadership with the Low Carbon Contracts Company Ltd (LCCC), the counterparty for the low carbon Contract for Difference (CfD) scheme. Further detail on LCCC appears in Practice Note: Industry Bodies and Codes—Renewable Energy. Great British Energy—Nuclear is an arm’s-length body tasked with delivering the...