End CfDs Before They Self-Destruct
It's 2025, and the UK is still paying an insurance premium on a house that stopped burning years ago.
Here's the scene: Britain has £90.4 billion in CfD liabilities on DESNZ's books. That's real exposure. That's already committed. That's reflected in your bills.
Around £50 billion of it is Hinkley Point C — a nuclear plant that won't generate until the 2030s, yet consumes a gigantic share of the subsidy balance sheet.
The remaining £40 billion protects wind and solar investors from risks that storage has already dismantled.
The system is working exactly as designed. Just not for you.
The only question is whether we dismantle it by design, or watch households keep paying for protection that no longer exists.
The Original Problem (Which Barely Exists Anymore)
When CfDs were introduced in 2012, renewables were genuinely exposed: • wild wholesale prices • deep negative-price events • curtailment wiping out revenue • expensive debt and equity • investors unwilling to take merchant exposure
CfDs fixed that. They stabilised investment and unlocked scale.
It was good policy for the 2010s.
What Changed
Storage arrived — and with it, the core uncertainties CfDs were designed to hedge began to vanish: • Curtailment risk falls when batteries store excess output. • Volatility flattens as storage smooths peaks and troughs. • Negative pricing becomes manageable because energy can be shifted. • Revenue becomes dual-stream: CfD floor plus merchant upside.
Storage doesn't eliminate every risk, but it has dismantled the catastrophic exposure CfDs were designed to insure.
The risk changed. The policy didn't
The Co-Location Problem
A CfD-backed wind farm adds a battery. Then: • the wind farm keeps its guaranteed CfD income • the battery captures the arbitrage upside • CfD payments continue even when the battery prevents curtailment • consumers bear the top-up costs
And here's the twist: co-location genuinely improves the system.
A turbine with a battery uses its grid connection more intelligently. It squeezes more value out of the same transmission cable. It turns a once-inflexible asset into a flexible node. It can deliver frequency response, voltage support, synthetic inertia — the services a renewables-led grid actually needs.
Co-location is exactly the kind of efficiency we should want: more performance from the same steel in the ground.
But under today's rules, that capability sits outside the subsidy logic. Project owners capture the upside. Consumers still pay the old risk premiums.
The asset owner hedges their own risk — and still gets paid as if the risk were unchanged.
They win twice. You pay once.
It's not corruption. It's inertia with mathematical precision.
The Legacy Trap
ROCs and early CfDs were priced for a world of high uncertainty and no flexibility.
That world has gone. The contracts haven't.
These schemes run untouched into the 2030s and 2040s, paying out as if the system they were designed for still existed.
Meanwhile, every household paying electricity bills subsidises a subsidy architecture built for a grid that no longer needs it.
What This Costs, Right Now
We are funding a system that: • pays for hedge protection storage already provides • compensates investors twice • locks households into long-dated liabilities calibrated to 2012 economics • suppresses the market signals storage depends on • preserves price guarantees long after the underlying risk has declined
Battery prices down 90% since 2012. Volatility down. Curtailment risk down. System flexibility up.
But the subsidy architecture is frozen in time.
And you're paying the bills.
The Political Reality
This is where the math becomes uncomfortable.
A government that leaves £90bn untouched becomes the custodian of someone else's profit. In five years, when households are still paying elevated bills and the next energy crisis hits, no minister can claim surprise. They saw it. They calculated it. They chose not to move.
A government that cuts even a third of the renewable subsidy exposure — £10–15bn of the £40bn — shrinks long-term liabilities, brings visibility to bill reductions within a parliamentary term, and tells a story about moving faster on energy, not slower.
The win goes to whoever moves first.
The cost of inaction compounds annually. And it's visible on every household bill.
Why the Fix Actually Works
Stop issuing new CfDs for mature renewables by 2030.
Not because renewables are the problem — they're not. But because hybrid renewable–storage projects can increasingly operate on PPAs and floor-price contracts. The storage does the hedging now. Consumers stop paying for yesterday's insurance.
Create voluntary buyout pathways for existing CfDs and ROCs.
Convert future subsidy streams into upfront capitalised settlements or refinancing options. Investors get certainty; government reduces long-term exposure. Even partial uptake could reduce liabilities by 20–40%. This isn't punishment. It's both sides walking away from a bad bargain that one side is no longer exposed to.
Let storage become the hedge.
As co-location scales — AR6 projects alone could host ~1.4GW of battery capacity — hybrid assets become inherently less exposed to price swings. Storage becomes the stabiliser CfDs were meant to be. The difference: households pay once, not twice.
Provide a 2025–2035 transition window.
A decade is enough for investors, lenders and system operators to adjust. This isn't a shock. It's a correction. Everyone gets time to see it coming.
Keep targeted support only for technologies with genuine system risk.
Long-duration storage. Industrial flexibility. Emerging clean technologies. Not mature wind and solar.
Not mature renewables earning merchant revenue on top of guaranteed floors.
What Happens If Nothing Changes
By 2030, Britain will have: • £90bn+ in locked liabilities on the books • Households still paying elevated bills • Policy frozen around a system that no longer exists • A storage-led grid running underneath an electricity subsidy architecture that actively suppresses the market signals storage needs
You'll have built the transition. The subsidy system will still be paying for a transition that happened in 2015.
By 2035, when the next demand peak hits and the cost conversation resurfaces, government will face a choice: admit the system was wrong, or defend it publicly while quietly extending it further.
History suggests it'll extend it.
What Actually Needs to Happen
No attack on renewables. No retreat from net zero. No shock to investors. No market disruption.
Just a clean correction:
stop paying for yesterday's risks, and start investing in tomorrow's resilience.
Investors get a glide path. The grid gets efficiency. Households get bills that reflect reality.
The Sentence That Matters
We're still paying insurance premiums on a house that stopped burning the moment we installed the batteries.
Time to update the policy. Time to update the bills.
Before the cost of not doing it becomes the defining energy story of the next government.
#EnergyPolicy #Renewables #BatteryStorage #ElectricityMarkets #EnergyReform #NetZero #Grow2Zero #SubsidyReform #CleanEnergy
One more point worth adding to the CfD debate: Standalone grid batteries are already delivering consistent double-digit returns in markets like Australia and the UK — often in the mid-teens, and in volatile periods even higher. That’s without owning any generation. When you co-locate a battery with wind or solar, the economics get even stronger: •the battery uses zero-marginal-cost energy •curtailment becomes revenue instead of a loss •the grid connection is used far more efficiently •and the project earns multiple revenue streams (arbitrage, ancillary services, capacity, etc.) The important part is this: Storage is now absorbing much of the market risk that CfDs were originally designed to hedge — but CfDs are still paying out as if nothing has changed. That’s why a 2030 phase-out is not ideological. It’s simply aligning the subsidy model with the reality of a storage-rich system.
Skip Bowman Yes CfDs are well past their sell by date. They protect the generator and to a limited extent the customer from excess profit when the price is above the CfD. But the disincentise investment in storage and pit pressure on networks as renewables are rarely near demand.
It’s funny — some fossil fuel advocates are celebrating my critique of CfDs as if it’s an argument for them. It isn’t. Not even close. Fossil fuels are a dead end: volatile, expensive, geopolitically fragile, and structurally uncompetitive once you electrify demand. Nothing in this debate changes that. The point is simply this: generation can now largely take care of itself. With storage, hybridisation and modern portfolios, wind and solar no longer need the old 2012-style revenue guarantees. What does need attention — urgently — is electrification. Europe and the UK won’t hit climate targets or lower household bills unless we shift the centre of gravity to the demand side: EVs, heat pumps, home batteries, flexible tariffs, building efficiency, and smart electrification of everything. If we get that right, fossil fuels don’t just lose market share — they lose any remaining excuse for existing. Ending outdated support schemes isn’t a win for fossil fuels. It’s the opposite: it’s how you accelerate the electrified system that finally makes them irrelevant.
What the U.S. shows — unmistakably — is that you don’t need 20-year price guarantees to scale renewables. They have no CfDs, no fixed strike prices. Instead they lower the build cost with simple tax credits, and then let wind, solar and batteries operate in the market. Developers manage their own risk through PPAs, hedges, co-located storage and trading desks. And it works: the U.S. is adding more renewables and storage than any country on earth. Which raises a fair question for the UK and Europe: if the U.S. can do this without CfDs, why can’t we? By 2030 we’ll have wind, solar and storage portfolios capable of hedging and shifting their own output. Yet we’ll still be pouring billions into CfDs and ROCs — long after the original risk they covered has disappeared. And as long as we keep these guarantees in place, we won’t get retail prices down. Consumers carry the downside. The smarter move is to retire legacy revenue guarantees, support upfront costs where needed, and push everything toward integrated portfolios that stand on their own feet. If the U.S. can build a clean system without CfDs, Europe can too.
At some point we need to stop pretending that a modern renewables business is a fragile, single-asset generator in need of permanent insurance. Look at what developers are actually building now: large-scale wind and solar + batteries + a trading desk. That’s not “a project”. That’s a vertically integrated portfolio with multiple income streams — wholesale, balancing, frequency support, intraday arbitrage, and negative-price absorption when baseload overshoots. And here’s the uncomfortable question: why isn’t that already a strong enough business case without a CfD? Batteries have changed everything. Add storage to a wind or solar fleet and you’ve got a hedge against cannibalisation, a firming product, a volatility engine, and a way to earn even when there’s no wind or sun. This is exactly why these portfolios now target 20–25% returns. So why keep underwriting them with a price guarantee? Why treat generation and storage as separate commodities when the economics are now fused? And why should consumers effectively pay twice — once through the CfD “insurance”, and again through the services market where the same company earns on the battery side? This isn’t anti-renewables. It’s pro-modernisation.