CurveBlock
Since the 2000s the UK has used several mechanisms to support renewable generation. Feed‑in Tariffs (FITs) supported small-scale generation and distributed solar through fixed payments for generation and export, but the scheme closed to new applicants as technologies matured. The Renewables Obligation (RO) incentivised larger projects via tradable certificates; it has been phased down as CfDs became the primary route for large-scale low‑carbon projects.
Contracts for Difference (CfDs) offer revenue stabilisation by paying the difference between a strike price (set via competitive allocation rounds) and the market reference price, helping developers to obtain finance for capital-intensive projects. CfDs are typically aimed at utility-scale projects and thus reduce merchant price exposure. Smaller projects have historically relied on FITs, corporate PPAs, merchant revenues or local aggregation approaches; the relative scarcity of subsidy support for small distributed assets affects how easily those projects can offer predictable returns to investors.
The withdrawal or tapering of particular support schemes alters risk profiles. Projects backed by CfDs tend to have lower offtake risk, supporting longer-term financing and potentially lower required returns. By contrast, merchant or PPA-based projects face price volatility, shaping investor appetite and the kinds of contractual protections required. Understanding which revenue streams underpin project cashflows is critical for valuation and for structuring fractional investment offers.
For retail investors exploring fractional stakes in renewables, awareness of historic and current support mechanisms helps to judge revenue predictability and the trade-offs between subsidy-backed projects and merchant or corporate‑offtake routes.