Who pays for CFD?

The Contract for Difference (CfD) scheme is a financial mechanism designed to incentivize the generation of renewable energy in the United Kingdom. As part of this scheme, electricity suppliers are mandated to contribute financially to support its operation.

To fulfill their obligation under the CfD scheme, electricity suppliers are charged a levy known as the CfD Supplier Obligation Levy. This levy is imposed on suppliers to ensure that they contribute their fair share towards the scheme's funding.

The CfD Supplier Obligation Levy is calculated based on the suppliers' market share, with larger suppliers contributing more to the scheme. This approach ensures that the burden of funding the CfD scheme is distributed fairly among all electricity suppliers.

The funds collected through the CfD Supplier Obligation Levy are used to provide financial support to renewable energy projects that have been awarded CfD contracts. These contracts guarantee a fixed price for the electricity generated by the project over a specific period, providing a stable revenue stream for investors.

In addition to supporting renewable energy projects, the CfD scheme also aims to reduce the UK's carbon emissions and increase the proportion of energy generated from low-carbon sources. By incentivizing the development of renewable energy, the scheme contributes to the UK's broader goals of decarbonizing its energy system.