Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Contracts for Difference definition

What does Contracts for Difference mean? In practice, a contract for difference in the UK electricity market is a long‑term private law contract under which a low‑carbon generator receives (or pays) the difference between an agreed strike price and a market reference price, stabilising revenues over the contract term. In Great Britain (England and Wales and Scotland) “cfd” usually means the statutory Contracts for Difference scheme established under the Energy Act 2013. The counterparty is the government‑owned Low Carbon Contracts company (LCCC). CfDs are awarded through competitive allocation rounds and funded by the electricity supplier obligation. Key legal features include a two‑way payment...

Great Britain Contracts for Difference: legal architecture, eligibility, allocation and auction rules, standard terms, key parties, CIB, OLR/NDD, RO interplay, and AR7–AR8 updates

Published by a LexisNexis Energy expert

Practice notes

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 payment/retainer to reliable forms of electricity capacity (in the form of generation plant, electricity storage (such as batteries), reduction in electricity demand and international Interconnection wires), in return for such capacity being

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Matthew Brown

Matthew is a Partner in the Energy & Climate Change Team.Matthew has a track record of advising government, regulators, network companies, developers and investors on energy sector regulation, renewables, and wider transactions in the utilities sector.With more than 450 energy and climate change lawyers, including over 100 partners, the CMS Energy and Climate Change practice is one of the largest of its kind in the world. Led from its centres of excellence such as London and Aberdeen, the practice works across 75 offices globally. Building on 40 years of experience advising on power, oil & gas and renewables through to energy disputes, emerging areas and Energy Transition, CMS is uniquely placed to ensure clients receive advice best suited to their commercial needs and to our collective future....

Sabrina Polito

CMS Cameron McKenna Nabarro Olswang LLP

Sabrina is an associate in the Energy & Climate Change Team and has broad experience in advising industry bodies, investors, generators, suppliers and networks in relation to a range of matters including projects, transactions, commercial arrangements and regulatory compliance in the UK and internationally. She has a particular interest in clean energy, emerging technologies and digitalisation of the energy sector. Sabrina has also completed secondments with EDF Renewables and National Grid plc....

Web page updated on 21/05/2026

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