CfD Indexation To Cost Energy Users £360 Million This Year

By Paul Homewood




The Contracts for Difference introduced by Ed Davey were poorly designed from the start, and are now costing energy users a fortune.

We already know that the contracts place no obligation whatsoever on generators to actually take up their options, enabling them to take advantage of much higher market prices as a result.

But just as costly has been the decision to index link strike prices each year for inflation. Given that most of the cost of a wind or solar farm is the capital cost, the indexation should only have applied to the operational cost.

This year’s price rise took effect at the beginning of April, and for offshore wind farms averages 11.9%. (For some reason I have not got to the bottom of, the increases vary slightly between generators).

This will cost energy users about an extra £360 million a year, based on last year’s outputs for all CfD generators. It puts the average cost of offshore wind up to about £175/MWh, compared to the current market price of around £100/MWh.

Since 2019, prices have risen by about 23%, costing consumers around £700 million a year now in total.


May 1, 2023 at 12:09PM

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