How does this affect low-carbon generators?
The RO will continue to operate until 2037 for those already registered, but from 2017 new installations can only join the CFD scheme.
The Capacity Market is a mechanism put in place by the Government to ensure electricity supply continues to meet demand as the number of renewable generation plants increases. It has become an alternative option for generators that can control when they generate and produce electricity when the system is under stress.
You can’t participate in the Capacity Market if you’re already registered in the FIT, RO or CFD schemes. Read about the latest Renewable Obligation updates and how they impact your business.
How do CFDs work to support renewable generators?
CFDs incentivise investment in new low-carbon electricity generation by reducing the risk and cost of investing.
They overcome the issue that electricity prices are hard to predict over the life of a low-carbon power plant. A CFD sets an agreed fixed price – called a strike price – for 15 years to reduce uncertainty about volatile wholesale prices and encourage long-term investment.
A strike price works like this: when the market rate for electricity falls below the strike price, generators are paid from a fund, run by the Low Carbon Contracts Company. When the rate exceeds the strike price, generators pay back into the fund.