CfD (capacity markets)
European Union Electricity Market Glossary


 

CfD in the capacity markets mean the Contract for Difference, which commonly represents the combination of the Standard Terms and a CfD Agreement (detailing any modifications to the Standard Terms), which when signed by the CfD Counterparty and an eligible generator comprise a single legally binding contract.

 

Under the UK CfDs model CfD Counterparty will be the Government-owned company being the counterparty for CfDs.

 

CfDs structure

 

A CfD will consist of two parts: Standard Terms and a CfD Agreement. Together these two documents make up the CfD.

 

The Standard Terms of the CfD will be a full set of contractual terms that will apply across all comparable CfDs (though in some cases, where necessary, it may be possible to make minor modifications that do not affect the value of the contract.

 

The CfD Agreement will list project-specific information, such as the generator's name, technology type, strike price, Target Commissioning Date etc.

 

Some of these details will affect how the Standard Terms apply to the project e.g. whether the CfD makes use of the intermittent or baseload market reference price.

 

The key areas that must be in every version of the Standard Terms are:

 

a. Term – the duration for price support under the CfD.

  

b. Calculation of Metered Output, Market Reference Price and Strike Price – the metering requirements for CfD recipients; process and formulae used to calculate the market price (currently there is one formula for the baseload reference price and one formula for the intermittent reference price); and details of the strike price.

 

c. Changes in law – for certain changes in law to result in compensation for a party.

 

d. Installed capacity adjustment – the process and amount by which a CfD recipient may reduce their project capacity.

 

e. Conditions precedent – the requirements that a CfD recipient must fulfil within a specific period after contract signature in order for payments to commence.

 

f. General provisions regarding liabilities, remedies and waivers – including clauses such as force majeure – the situations in which specific actions undertaken or not undertaken by the CfD recipient, which would otherwise be deemed breaches of their contract, would be considered to be sufficiently outside of their control to warrant no sanction – and limited recourse – which sets out that the liability of the CfD Counterparty shall not exceed the amount received and held by the CfD Counterparty from suppliers, alongside other general provisions associated with representations, waivers and warranties.

 

g. Dispute resolution – the processes by which disputes between the CfD Counterparty and the generator are resolved.

 

h. Termination – the reasons for and processes by which the CfD Counterparty may terminate a CfD and any associated payments.

 

i. Change control procedure – how the CfD can be amended, transferred or assigned after contract execution.

 

 

 

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Last Updated on Sunday, 07 February 2016 21:17
 

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