CfD targets stretched to reduce the cost of capital

The UK government has confirmed it will extend the length of its renewable energy contracts—from 15 years to 20—under the Contracts for Difference (CfD) scheme. This change kicks in with Allocation Round 7 (AR7), and applies to solar, onshore wind, offshore wind, and floating offshore wind technologies.

The CfD scheme, the government’s flagship program for supporting low-carbon electricity, offers developers a guaranteed price for the power they generate. By stretching the contract period to 20 years, the UK hopes to lower developers’ cost of capital and—eventually—pass those savings on to consumers.

Whether those savings materialize in practice, however, remains to be seen.

According to the Department for Energy Security and Net Zero, longer contracts will help balance the high upfront costs of renewable infrastructure with more predictable, longer-term returns.

The government argues this will smooth out the cost curve of the energy transition and help maintain momentum toward its Clean Power 2030 goals, especially as electricity demand balloons in the coming decades.

The change follows industry lobbying and months of consultation, with a majority of developers arguing that 15-year contracts no longer reflected market realities—especially amid volatile power prices, rising interest rates, and growing exposure to negative pricing.