A Contract for Difference (CfD) is a long-term contract that guarantees a low-carbon generator a fixed price, called the strike price, for each megawatt-hour (MWh) it produces. It is the UK government’s main way of supporting new renewable and nuclear power stations.
How it works
The generator sells its electricity on the market as normal. The CfD then settles the difference between two prices:
- the strike price, agreed in the contract and adjusted for inflation;
- the reference price, a measure of the market price of electricity.
When the reference price is below the strike price, the generator receives a top-up. When it is above, the generator pays the difference back. The counterparty is the Low Carbon Contracts Company, a government-owned company. Top-ups are funded by a levy on electricity suppliers, and payments back reduce that levy, so the costs and savings end up in consumers’ bills.
Allocation rounds
CfDs are awarded in competitive auctions called allocation rounds. Projects bid in groups of technologies called pots, and the government sets a maximum, or administrative, strike price for each technology. From Allocation Round 7 (AR7), contracts for offshore wind, onshore wind and solar run for 20 years instead of 15.
AR7 results, in 2024 prices:
| Technology | Clearing strike price | Capacity |
|---|---|---|
| Offshore wind (England and Wales) | £91.20/MWh | 6,865 MW |
| Offshore wind (Scotland) | £89.49/MWh | 1,380 MW |
| Floating offshore wind | £216.49/MWh | 192.5 MW |
| Onshore wind (AR7a) | £72.24/MWh | 1,306 MW |
| Solar PV (AR7a) | £65.23/MWh | 4,905 MW |
Offshore results were published in January 2026 and the AR7a results for onshore wind and solar in February 2026.
Why it matters
A fixed price over decades makes revenue predictable, which lowers the cost of borrowing for capital-heavy projects. In return, generators give up the extra income they would earn when market prices are high.
Read more: Wind energy: how wind turbines power Britain.