To accelerate the development of RES and carbon-neutral generation required for the energy transition, public support schemes will likely continue to play a role in the coming years. Two-sided Contracts for Difference (CfDs) have recently become increasingly popular, particularly for offshore wind tenders. In the wake of increased energy prices as of 2021, two-sided CfDs may also be used to reduce impact on end-consumers while providing long-term investment signals to developers.

The provisionally agreed legislative proposals for the reform of European Electricity Market Design, which will enter into force this year, prescribe two-sided CfDs as the default option for Member States to support RES and carbon-neutral generation. As recognised by the new European Regulation, the design of such support schemes can significantly impact system operations as well as the functioning of wholesale and balancing markets. In ENTSO-E’s view, it is crucial to promote well-designed CfDs to ensure a cost-efficient, sustainable and secure energy transition. This paper aims to inform policymakers and relevant stakeholders of the potential impact of two-sided CfDs on system operations and market efficiency, and how an improved CfDs design can help mitigate such risks.

Please find the full position paper HERE.