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Contracts for Difference Explained

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Regina Finn

Regina Finn

Chair, Low Carbon Contracts Company

Chair of Low Carbon Contracts Company, Regina Finn, explains what the Contracts for Difference scheme is and outlines their commitment to championing gender equality.
www.lowcarboncontracts.uk

Net Zero is the economic opportunity of the 21st century – that was the message of the Mission Zero: Independent Review of Net Zero led by Rt Hon Chris Skidmore MP. The Low Carbon Contracts Company (LCCC) has a vital role in accelerating the delivery of Net Zero and ensuring that the UK capitalises on that opportunity. As much as one-fifth of the carbon emission reduction needed between now and 2035 will be delivered under schemes that LCCC operates.

We operate the Contracts for Difference (CfD) scheme, which is the Government’s contractual business model for incentivising investment in low-cost, low-carbon electricity generation, such as wind and solar. The CfD scheme provides confidence to investors – mobilising private sector investment in secure, renewable, low-carbon energy, at the least cost to the consumer.

The CfD scheme also plays a crucial role in protecting consumers from high wholesale electricity prices. It brings forward new, low-cost generation and ensures that these low-carbon generators benefit consumers when wholesale prices climb above the pre-agreed contractual prices; in 2022, the CfD scheme paid back £590 million to energy suppliers. This effect will only grow as more low-cost renewables come online under the CfD scheme.

Low Carbon Contracts Company is using contracts for difference to support the delivery of carbon capture, usage and storage and hydrogen.
Low Carbon Contracts Company is using Contracts for Difference to support the delivery of carbon capture, usage and storage and hydrogen.

LCCC has been in operation since 2014 and now has more than 165 CfD schemes under management. When these projects are all underway, they will provide around 30% of Great Britain’s power needs. LCCC still has big challenges ahead, first, in our core power business – supporting the delivery of a huge increase in low-carbon generation contracts – and second, using the established contract model in new areas to support the delivery of carbon capture, usage and storage (CCUS) and hydrogen.  LCCC also has a big part to play in nuclear industry developments, with the Hinkley Point C CfD contract in our portfolio, as well as Sizewell C under the Regulated Asset Base Model.

LCCC also supports the Department for Energy Security and Net Zero, as it develops the policies needed to deliver Net Zero. Our real-world experience of how the CfD scheme works and our unique position in the market, mean we can help the Department develop solutions that are right first time and that are more likely to deliver the accelerated investment we need to decarbonise our economy. We do this because of our people; we are a business with a strong mission that inspires and enthuses, making LCCC a great place to work. As we grow, we are ensuring that diversity and inclusion remains one of our greatest strengths.

As we celebrate International Women’s Day, we are proud that we outperform the energy sector; women make up 50% of our board members and about 40% of our staff. We have 20 different nationalities represented amongst our colleagues and 58% of our staff are from ethnic minority groups other than white British. All of this, along with a wide range of backgrounds, skills and experience, makes for a lively and diverse working environment. We are not complacent – we continue to work hard to attract and maintain diversity and inclusion in our business.

It is a real honour and privilege to be involved in such a dynamic business; one that is taking on a real leadership role in our transition to Net Zero and doing so with a team that reflects the richness and diversity of the society we are working for.

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Curia’s Energy Sustainability Commission

To find out more about policy institute Curia‘s energy sustainability commission, contact team@curiauk.com.

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