Billions of pounds of investment is needed to replace the United Kingdom’s aging power generation assets and meet Government objectives for decarbonisation of the electricity sector.
The Department of Energy and Climate Change (DECC) introduced Electricity Market Reform (EMR), which included a new scheme comprising long-term Contracts for Difference (CfD), contracts to support investment in new low carbon generation. The CfD provides a guaranteed strike price for power purchases, regardless of market prices, and is the new mechanism for subsidising offshore wind generation.
CfD contracts were awarded to some offshore wind projects ahead of the introduction of the EMR legislation under the so-called Final Investment Decision (FID) Enabling programme. A single round of CfD auctions subsequently took place, with further offshore wind projects securing contracts, albeit at much lower strike prices.