Contracts for difference: risks faced by generators under the new renewables support scheme in the UK

The Energy Act 2013 received royal assent in December 2013. It implements the Feed-in-Tariff Contracts for Difference (the CfD) which is set to become the primary support scheme for low carbon generation in the UK by 2017. The CfD will be in the form of a long-term contract between a low carbon generator and a counterparty which is a state-owned limited liability company (the CfD Counterparty). It is intended to remove long-term price risk for low carbon generators which sell electricity into the market, thereby stabilizing their revenues and reducing the cost of financing their projects. This article comments on the uncertainties currently faced by generators (or developers) of existing (or planned) electricity generation plants in the UK brought on by the implementation of the CfD regime.