Record January CfD Subsidies in 2026

We spent more on CfD subsidies in January 2026 than any other January with more to come in February.

Introduction

It has been a while since publishing a bonus article. However, the Low Carbon Contract Company (LCCC) has recently published the Contract for Difference (CfD) subsidy data for January and the results, coupled with recent movements in the electricity market warrant a quick article.

CfD Subsidies in January 2026

The headline is that we paid £269.7m in CfD subsidies in January 2026. This is a record for the month of January, beating the £206m paid in January 2024 by some margin as shown in Figure 1.

Figure 1 - Record January CfD Subsidies in 2026

The bulk of the subsidies were paid to offshore wind that took £210.7m of the total. The various forms of biomass took most of the rest. Solar paid back £0.7m, largely due to the cheaper solar farms that came online last year.

This is worrying because wholesale prices surged during the month as a result of rising gas and carbon prices. CFDs offer a fixed index-linked strike price to generators. Generators receive the wholesale price from the market and a subsidy top-up to the strike price, so rising wholesale prices should reduce subsidies. Subsidies may fall to zero or even result in generators paying back if the strike price is below the market price. This is why solar paid back £0.7m in January 2026.

Offshore wind generation in January was also at record levels for the month with generation up over 42% on January 2025. More generation outweighed the impact of higher wholesale prices.

Impact of Gas and Carbon Prices on Wholesale Electricity Prices

We can see the prices of the front month continuous contracts of UK electricity, gas and carbon in Figure 2 (data from TradingView).

Figure 2 - Front Month Continuous Contracts for UK Electricity, Carbon and Gas

Carbon prices rose from a low around £30/t in January 2025 to a peak of over £70/t in mid-January 2026. This led to an increase in electricity prices from about £70/MWh in early April 2025 when gas prices were about 83p/therm to £83/MWh in early-January 2026 when gas prices had fallen to about 73p/therm.

Gas prices then spiked to nearly 104p/therm in late January and electricity prices followed gas prices up to £107/MWh even though carbon prices fell back to about £66/t. Since then gas, electricity and carbon prices have fallen back to 71p/therm, £70/MWh and £46/t on 17 February 2026. The spike in gas prices appears to have been caused by fears of low stocks in Europe during a cold snap and carbon prices have fallen since Chancellor Merz of Germany said the EU Emissions Trading Scheme “should be revised or postponed if it undermines industrial competitiveness”. Merz’ comments were also echoed by the Czech Prime Minister.

Outlook for CfD Subsidies

All this means that we can expect record subsidies for wind in February 2026. Lower gas and carbon prices mean lower wholesale electricity prices. With only eight days (28.6%) of data recorded for February 2026 recorded, total generation for CfD-funded offshore wind is already 38% of the total in February 2025. It looks like offshore wind in February 2026 is on track to generate even more than the previous record in February 2025.

We will not feel those lower prices because the CfD-funded windfarms will keep their fixed, index-linked strike prices and push cheaper gas off the grid. We will be forced to pay the higher subsidies through our bills.

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