Quick answer
The Contracts for Difference scheme is the UK's main mechanism for supporting low-carbon electricity generation. Successful projects in periodic Allocation Rounds receive a 15-year contract that stabilises their revenue at an agreed strike price, paying or receiving the difference versus the wholesale market. CfDs underpin most large-scale UK renewables investment.
Advisor summary
Contracts for Difference (CfD) is the UK government's primary mechanism for supporting new low-carbon electricity generation. Successful projects are awarded a 15-year private law contract with the Low Carbon Contracts Company (LCCC) that pays the difference between a strike price (set at auction) and a reference market price. CfD is a competitive auction scheme run in periodic Allocation Rounds across pots covering established and less established technologies.
Who this is for
Developers of eligible low-carbon electricity generation projects (offshore and floating offshore wind, onshore wind, solar PV, tidal stream, geothermal, biomass with CHP, advanced conversion technologies, and others as published by DESNZ).
Frequently asked questions
Who runs CfD allocation rounds?
DESNZ sets policy, National Grid ESO acts as delivery body and LCCC counterparty signs the contracts.
Are auction parameters fixed?
No — pots, budgets, ARPs and capacity caps are set per round. Always reference the current Allocation Framework.
How long is a CfD?
15 years of indexed strike-price payments from the commissioning date.
What technologies are eligible?
Eligibility varies by round; common pots include solar, onshore wind, offshore wind, tidal stream and others.
Can community projects bid?
Eligibility depends on capacity thresholds and technology pot — confirm against current Allocation Framework.
What is the Supply Chain Plan threshold?
Above the published capacity threshold, an approved SCP is required.
What happens if I miss the Milestone Delivery Date?
The contract may be terminated.
Are floating offshore wind projects eligible?
Yes, generally in the less established technologies pot.
Is the strike price inflation-linked?
Yes — indexed to CPI.
Where is official guidance?
DESNZ's CfD Allocation Round guidance and the current Allocation Framework document.
Read end-to-end by a FundingAtlas editor against the official source.
Funding amount
15-year price-stabilising contracts
Region
United Kingdom
Stage
Growth
Provider
Department for Energy Security and Net Zero
Advisor summary
Contracts for Difference (CfD) is the UK government's primary mechanism for supporting new low-carbon electricity generation. Successful projects are awarded a 15-year private law contract with the Low Carbon Contracts Company (LCCC) that pays the difference between a strike price (set at auction) and a reference market price. CfD is a competitive auction scheme run in periodic Allocation Rounds across pots covering established and less established technologies.
Key takeaways
- Competitive auction
- Long-term contract
- Strike price risk transfer
- Eligibility gateway
- Round design changes
Who this is for
Developers of eligible low-carbon electricity generation projects (offshore and floating offshore wind, onshore wind, solar PV, tidal stream, geothermal, biomass with CHP, advanced conversion technologies, and others as published by DESNZ).
Real-world use cases
Offshore wind
Solar + onshore wind
Tidal stream
What to prepare before applying
- 1
Planning consent
- 2
Grid connection
- 3
Supply chain plan
- 4
Financial standing
- 5
Bid strategy
Common mistakes
Late consents
Aggressive strike pricing
Supply chain plan gaps
Common rejection reasons
Failed milestones
Ineligible technology
Documentation defects
Alternative funding routes
Industrial Energy Transformation Fund
Boiler Upgrade Scheme
Energy Entrepreneurs Fund
Green Heat Network Fund
Typical funding journey
- 1
Round announcement
- 2
Application
- 3
Award
- 4
Delivery
Advisor view
This sits inside a fast-moving net zero policy stack. Strong applications show measured carbon impact, credible delivery partners and a project that would proceed but for the funding.
Usually too early when
Advisor signal
You have no defined technical project, no carbon baseline, no delivery partners, or you cannot evidence additionality against business-as-usual.
Eligibility
Developers of eligible low-carbon electricity generation projects in the UK that meet round criteria.
Common reasons applications fail
Weak additionality, immature project plan, missing partners, or underestimating build-out and consenting timeline.
What improves your odds
A measured carbon baseline, named delivery and engineering partners, planning consents in train, and a clear additionality case.
Typical successful applicant
A developer, public body, manufacturer or industrial operator with a defined decarbonisation project and finance lined up for the unfunded portion.
Common misconceptions
Headline pots are rarely a single grant — they are programmes with windows, technical gates and co-funding expectations.
What comes next
If awarded, expect quarterly reporting on carbon, cost and milestones. Build the reporting discipline before funding lands.
Funding context
Often combined with private finance, supplier discounts and other DESNZ or local authority programmes.
Eligibility Quick Check
A cautious, rules-based check using only the criteria already published for this programme. Not a guarantee — always verify against the official source.
Frequently asked questions
- Who runs CfD allocation rounds?
- DESNZ sets policy, National Grid ESO acts as delivery body and LCCC counterparty signs the contracts.
- Are auction parameters fixed?
- No — pots, budgets, ARPs and capacity caps are set per round. Always reference the current Allocation Framework.
- How long is a CfD?
- 15 years of indexed strike-price payments from the commissioning date.
- What technologies are eligible?
- Eligibility varies by round; common pots include solar, onshore wind, offshore wind, tidal stream and others.
- Can community projects bid?
- Eligibility depends on capacity thresholds and technology pot — confirm against current Allocation Framework.
- What is the Supply Chain Plan threshold?
- Above the published capacity threshold, an approved SCP is required.
- What happens if I miss the Milestone Delivery Date?
- The contract may be terminated.
- Are floating offshore wind projects eligible?
- Yes, generally in the less established technologies pot.
- Is the strike price inflation-linked?
- Yes — indexed to CPI.
- Where is official guidance?
- DESNZ's CfD Allocation Round guidance and the current Allocation Framework document.
Related routes
Industries
Objectives
Regions