Are contracts-for-differences here to stay?

The European energy crisis is dragging on, and voices to reform electricity markets are getting louder. Market reforms are going to be discussed (and potentially already implemented) within the first months of 2023. Reforms may involve changes in pricing rules to eliminate so-called windfall profits and give consumers access to cheap renewables. Leading academics are advocating for hybrid markets that encompass spot markets with marginal pricing as well as mandated long-term fixed-price contracts. The systematic integration of mandated long-term contracts into electricity markets would be the largest change in electricity markets since they were established some twenty years ago. Such long-term contracts can take the form of Contracts-for-Difference, allocated via competitive procurement.

Contracts-for-Differences have been used by governments in the procurement of renewable energy for many years now. But, what are these Contracts-for-Differences precisely? In which form and function do they come on different European markets?

In this FSR Insights event, Lena Kitzing will give an overview of Contracts-for-Differences used for renewable energy procurement, and their role as risk management tool to facilitate financing. Lena will also reflect on how Contracts-for-Difference have never seemed to be intended to stay here for good – the ultimate goal of supporting renewable energies was getting them ‘market-ready’ after all. This raises the question of how the design of Contracts-for-Difference must be rethought so that they can become a permanent part of electricity market design?

Hosts

• Leonardo Meeus | Florence School of Regulation (FSR)
• Lucila de Almeida | FSR & Nova School of Law

Keynote Speaker

• Lena Kitzing | DTU Department of Wind and Energy Systems

Discussants

• Pablo Rodillas  | Comillas Pontifical University
• Anne Held  | Fraunhofer Institute for Systems and Innovation Research ISI

Want to know more about the topic? Check out our course on Regulation and Integration of Renewable Energy, directed by Lena Kitzing and Mario Ragwitz.

Lena Kitzing is Associate Professor in Energy Economics and Policy, and Head of Section ‘Society, Market and Policy’ at the Technical University of Denmark, DTU Wind and Energy Systems. Her research spans across the energy-economy-society nexus and especially concerns the effective governance of energy systems through policy instruments, with particular focus on deployment and financing of renewables and their integration into the energy system. Lena is a leading expert in the economics and policy for offshore wind energy with a number of highly published articles in the area. She has participated in and coordinated many international research projects, often gives scientific advice to public and private organisations, is regularly invited to key note speeches and conference panels, and appears in the Danish national media on energy related issues. Lena is a registered expert for the European Commission, has been board member of the Joint Programme for wind energy of the European Energy Research Alliance, and serves on the board on several energy initiatives in Denmark.  Lena is member of the European Scientific Advisory Board on Climate Change, which advises policymakers and stakeholders on climate and energy related decisions.