CurveBlock
Contracts for Difference (CfDs) are designed to provide predictable revenues by setting a strike price for low‑carbon generation and settling the difference with market prices. The mechanism reduces market price exposure and can improve project bankability by providing long‑term revenue certainty. CfDs are typically used by larger, utility‑scale projects that can engage in competitive allocation processes and meet the administrative criteria for participation.
By contrast, smaller projects often sell into wholesale markets or secure bilateral Power Purchase Agreements (PPAs) with corporate or supplier counterparties. Merchant routes expose projects to wholesale price volatility but can offer upside in high-price environments; PPAs can offer tailored credit and price structures (fixed, floor/ cap, or index-linked) that sit between pure merchant exposure and CfD‑style stability.
The choice between CfD and merchant/PPA affects financing, counterparty risk and operational priorities. Projects with CfDs trade some upside for reduced revenue volatility and, consequently, tend to access cheaper debt and broader institutional investor interest. Merchant or PPA routes place greater emphasis on offtaker credit quality, short‑term price forecasting and active commercial management, including route to market via aggregators or sleeved arrangements.
For retail fractional investors the distinction is material: offerings underpinned by CfD‑like mechanisms typically claim clearer, horizon‑length cashflow visibility, while merchant or PPA‑backed assets may deliver variable returns and require transparent assumptions about price exposure, offtaker terms and mechanisms for allocating market revenues to fractional holders.