Contract for Difference (CfD)

A Contract for Difference (CfD) is an agreement between a renewable energy generator and a regulator, where the regulator guarantees a fixed price (strike price) for the electricity produced. If the market price is lower than this strike price, the regulator pays the generator the difference; if higher, the generator pays back the difference. This mechanism provides revenue stability for developers, encouraging investment in renewable energy projects by reducing exposure to market price fluctuations and ensuring predictable income.