Member

Before I turn to the provisions in greater detail, I shall first outline some of the background of the contract for difference scheme. The contract for difference scheme is His Majesty’s Government’s main mechanism for supporting low-carbon electricity generation in Great Britain. Under a CfD, the generator receives a fixed price for electricity over the contract term. The generator sells the electricity it produces on the wholesale market and receives difference payments from the Low Carbon Contracts Company when the wholesale price is below the strike price. If wholesale prices exceed the strike price, the generator must make difference payments to the LCCC. Where the LCCC makes difference payments to the generator, they are funded by a statutory levy on all licensed electricity suppliers, so they are passed on to households and businesses through their electricity bills. The CfD funding mechanism is fundamental to achieving the government’s goal of a fully decarbonised power supply, while achieving value for money for electricity customers. It protects consumers when electricity prices are high and provides income stabilisation for generators across the term of the contract. For example, if Hinkley Point C had been online during the energy crisis in 2022-23, consumers would have saved around £5 billion.