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Calculate the minimum Contract for Difference strike price required for your UK renewable project to achieve a target equity IRR.
Based on WACC-adjusted LCOE and target equity return
A Contract for Difference (CfD) is the UK Government's main support mechanism for new renewable energy projects. Think of it as a price guarantee. The Government agrees to pay the developer a fixed "strike price" per unit of electricity. When wholesale market prices are lower than the strike price, the Government tops up the difference. When prices are higher, the developer pays back the excess. This gives developers stable, predictable income regardless of volatile market prices.
Building a wind farm or solar park costs hundreds of millions of pounds. Banks and investors need certainty they will get their money back before they lend. The CfD strike price provides that certainty. If it is too low, the project will not be profitable enough to attract investment. This calculator finds the minimum price that makes a project financially worthwhile.
No wind turbine generates at full power all the time. The load factor is the percentage of maximum output a project actually achieves on average. Offshore wind typically achieves 40-50%, meaning a 100 MW farm produces as much electricity as a 40-50 MW conventional plant running continuously.
The UK Government holds CfD Allocation Rounds (AR) every one to two years. Projects bid competitively - those submitting the lowest strike prices win contracts. Understanding your break-even price helps you bid strategically without underselling.
The minimum strike price is the Levelised Revenue Requirement (LRR) - the revenue per MWh needed to service debt, cover opex, and deliver the target equity IRR over the project life, using a WACC-based Capital Recovery Factor (CRF):
Annual Generation = Capacity (MW) x Load Factor x 8,760 hours/year
This simplified model excludes: construction-period interest (IDC), detailed tax/depreciation waterfall, CPI indexation (UK CfDs are quoted in 2012 real prices), decommissioning provisions, grid connection costs, and the merchant tail (revenue post-CfD). A full project finance model would use period-by-period DCF with separate equity and debt waterfalls.
To compare output with published AR results, divide by the cumulative CPI deflator since 2012 (approximately 1.25-1.30 as of 2024) to convert to 2012 real prices used in DESNZ/LCCC publications.