CfD Levy

Contracts for Difference are the government's main mechanism for supporting new renewable energy projects like offshore wind farms. Generators are guaranteed a "strike price" for their electricity - if wholesale market prices fall below this, the CfD scheme pays them the difference. If market prices exceed the strike price, generators pay money back.

The quarterly levy, administered by the Low Carbon Contracts Company (LCCC), funds these support payments. Interestingly, during periods of very high wholesale prices (like those seen in 2022), the levy can drop to zero or even result in credits, as generators pay back their excess earnings.

Key facts:

• Quarterly rates from LCCC (changes 1 Jan, 1 Apr, 1 Jul, 1 Oct)
• Called the Interim Levy Rate (ILR)
• Can be zero when market prices exceed strike prices (as in 2021-2022)
• Small Operational Costs Levy (~£0.10/MWh) for LCCC administration
• Applies to ALL electricity consumption with no exemptions

This charge applies to all electricity customers and reflects the national commitment to decarbonising the power system.