Explain how a two-sided contract for difference allocates price risk between generator and counterparty.
Oil, Gas & Energy
Contracts for Difference and Auction Design for Low-Carbon Power
Prepares developers and policy analysts to price bids into low-carbon power auctions, negotiate contract for difference strike prices and manage reference price and curtailment risk.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
Contracts for difference have become the dominant support mechanism for low-carbon power in many markets, but developers who misjudge the auction design or the contract's reference price mechanism can win a project that looks attractive on paper and then struggles against real market conditions. This course explains how two-sided contracts for difference work, where the generator pays back the difference when the market price exceeds the strike price and receives a top-up when it falls below, and why that structure changes a developer's exposure to negative pricing and curtailment compared with a simple feed-in tariff. Sessions cover auction design choices that policymakers make, including qualification criteria, technology-specific pots, clearing price methodology and de-rating factors, and how these choices shape the bidding behaviour of participants. The course then moves to bid strategy, teaching participants to model a defensible strike price using project cost, financing terms and expected market revenue, and to assess indexation, inflation adjustment and reference price risk before submitting a bid. Case exercises use published auction results so participants can see how design choices translated into actual clearing prices and project outcomes.
Expected Learning Outcomes
Assess auction design elements, including qualification criteria, technology pots and clearing methodology.
Model a defensible strike price bid using project cost, financing terms and expected market revenue.
Evaluate reference price risk arising from the difference between a generator's output profile and the reference price.
Assess negative pricing and curtailment exposure under a contract for difference compared with alternative support mechanisms.
Apply indexation and inflation adjustment terms correctly when comparing bids across different auction rounds.
Interpret published auction results to benchmark a bid strategy against actual market clearing outcomes.
Who Should Attend
Renewable energy developers preparing bids for low-carbon power auctions
Project finance analysts assessing contract for difference revenue risk
Policy analysts designing or reviewing low-carbon power auction rules
Energy regulators overseeing contract for difference counterparty arrangements
Power market analysts forecasting auction clearing prices and participation
Investors assessing project portfolios with contract for difference revenue support
Course Modules
Select any module to see its sessions and points.
01Contract for Difference Mechanics
2 sessions · 8 points
Session 1How Two-Sided Contracts for Difference Work
- Explain the payment flows between generator and counterparty when market price exceeds or falls below strike price.
- Compare two-sided contracts for difference against feed-in tariffs and green certificate support mechanisms.
- Assess how the reference price is calculated and why it may differ from a specific generator's actual output price.
- Identify contract term length and its effect on long-term revenue certainty for project financing.
Session 2Reference Price and Basis Risk
- Assess reference price risk arising when a generator's output profile diverges from the market-wide reference price.
- Evaluate how technology-specific reference prices reduce basis risk compared with a single market-wide reference.
- Model the financial impact of basis risk on project revenue under different generation profile assumptions.
- Identify hedging strategies available to manage residual reference price risk within a project's finance plan.
02Auction Design and Policy Choices
2 sessions · 8 points
Session 1Qualification Criteria and Technology Pots
- Assess qualification criteria, including project maturity and grid connection status, used to screen auction entrants.
- Compare technology-specific pots against technology-neutral auctions for their effect on competition and pricing.
- Evaluate de-rating factors applied to intermittent technologies within capacity-based auction mechanisms.
- Identify local content or supply chain requirements that auction design may attach to qualification.
Session 2Clearing Price Methodology and Auction Format
- Compare pay-as-bid and uniform clearing price methodologies for their effect on bidder strategy and outcomes.
- Assess sealed-bid and descending clock auction formats used in different low-carbon power markets.
- Evaluate budget caps and administrative strike price ceilings and their effect on auction clearing volume.
- Identify how auction frequency and volume signalling affect long-term investor confidence in the pipeline.
03Bid Strategy and Financial Modelling
2 sessions · 8 points
Session 1Modelling a Defensible Strike Price Bid
- Build a project cost model covering capital expenditure, financing terms and operating cost assumptions.
- Incorporate expected market revenue and curtailment assumptions into the strike price calculation.
- Apply indexation and inflation adjustment terms consistently when comparing bids across auction rounds.
- Test strike price sensitivity to financing cost and construction cost escalation scenarios.
Session 2Curtailment, Negative Pricing and Risk Allocation
- Assess exposure to negative pricing periods and how contract terms allocate that risk between parties.
- Evaluate curtailment compensation provisions and their effect on a project's realistic revenue forecast.
- Compare risk allocation approaches across different national contract for difference programmes.
- Identify contractual protections available to developers against grid curtailment beyond agreed thresholds.
04Learning from Auction Outcomes
2 sessions · 8 points
Session 1Analysing Published Auction Results
- Interpret published clearing prices and allocated capacity from recent low-carbon power auction rounds.
- Assess why certain auction rounds under-subscribed or over-subscribed relative to available budget.
- Compare strike price trends across auction rounds to identify cost reduction or cost inflation patterns.
- Identify design changes made between auction rounds in response to previous outcomes.
Session 2Applying Lessons to Future Bid Strategy
- Benchmark a prospective project's cost base against strike prices achieved in comparable recent auctions.
- Adjust bid strategy to reflect current supply chain, financing and policy conditions ahead of the next round.
- Assess portfolio bidding strategies for developers participating with projects across multiple technologies.
- Prepare a bid submission package that satisfies qualification, technical and financial evidence requirements.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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