Contracts for Difference (CfD) for offshore wind in the Netherlands

The government considers CfDs to be a replacement for the SDE++ subsidy scheme and the temporary offshore wind support mechanism (TOWOZ). In the political agreement reached between the parties of the current Dutch government, which sets out policy priorities and plans and guides the government's agenda for the parliamentary term (only available in the Dutch language), the government stated its commitment to continue investing in offshore wind energy through CfDs for 40 GW of installed capacity.

On 20 March 2026, the Netherlands Environmental Assessment Agency (PBL) published a market consultation regarding TOWOZ, the SDE++ 2026, SDE++ 2027 and CfD 2027. For this purpose, PBL published a note regarding the SDE++ 2027 and CfD 2027 (the Note) (only available in the Dutch language). In respect of the CfD 2027, the primary focus of the consultation is the required level of support for effective promotion of offshore wind. Market parties can respond until 17 April 2026 to the consultation.

On 30 March 2026, the Ministry of Economic Affairs and Climate Policy (EZK) (the Ministry) elaborated during a public meeting on the draft decisions regarding the mechanics of the CfD instrument which were described in the Letter to Parliament, focusing on the CfD instrument for offshore wind energy (the Meeting).

This blog discusses certain considerations included in the Letter to Parliament, the Note and regarding the Meeting on the intended CfD instrument.

Background

Pursuant to the European Electricity Regulation (Regulation (EU) 2019/943), as from 17 July 2027 Member States wishing to provide direct price support in respect of new electricity production facilities using, among other things, offshore and onshore wind and solar-PV must do so in the form of two-way contracts for difference or equivalent schemes with the same effects. In respect of offshore hybrid asset projects connected to two or more bidding zones, this obligation applies as from 17 July 2029. As a result, as from the mentioned dates, it will no longer be possible to offer price certainty to such projects using the current SDE++ and TOWOZ subsidy schemes.

In the Letter to Parliament, the Minister states that the intention is to introduce two-way CfDs: a two-way contract between the government and a renewable energy producer, in which a price (the "strike price") is agreed. PBL will annually determine the maximum bid amount (the maximum strike price) for each technology category, comparable to the SDE++ scheme. 

Under the CfD, if the reference price (as discussed below) falls below the strike price during a calendar year, the government should pay the difference to the producer. Conversely, if the reference price rises above the strike price during a calendar year, the producer should pay the difference to the government.

The reference price shall be determined based on the relevant annual average market price of electricity. According to the Note, PBL uses the assumption that the reference price will be corrected for profile costs. Thus, the reference price is not equal to but to a certain extent comparable to the correction amount in the SDE++ scheme. For example, SDE++ correction amount is also based on an annual average electricity market price and is among others corrected for profile costs.

Intended design of the CfD instrument

New legislation is required to establish the legal basis for the CfD instrument. In autumn 2025, the draft bill 'Two-way Contracts for the Settlement of Differences' (only available in the Dutch language) was made available for online public consultation. Currently, the draft bill is pending with the Council of State for advice. The draft bill provides for the possibility of applying CfDs for other activities than wind energy and solar PV, such as nuclear energy, renewable heat, electrification or carbon capture and storage (CCS).

According to the Letter to Parliament, the Minister uses the following three principles when shaping the CfD instrument: (1) an appropriate distribution of financial risks between market parties and the government, (2) limited disruption to electricity markets, and (3) practical workability of the instrument for both the government and renewable electricity project developers. For offshore wind energy, the instrument must be competitive with CfD instruments for offshore wind energy in other Member States.

In the Letter to Parliament, the Minister addresses certain draft decisions regarding the mechanics of the proposed CfD instrument for offshore and onshore wind energy and solar PV projects, a number of which draft decisions are discussed below. In addition, certain market consultation questions posed by PBL in the Note and certain observations made by the Ministry during the Meeting are discussed. The details of the mechanics applicable to the CfDs will be laid down at a later stage in draft contracts by ministerial regulation.

Bidding procedure

Parties with the highest ranking in the bidding procedure qualify for a CfD. Bids for offshore wind energy, onshore wind energy and solar PV are in the first place ranked on the basis of support intensity: the amount in euros of expected support per avoided tonne of CO₂ emissions (onshore wind energy and solar-PV) respectively per produced kWh electricity (offshore wind energy). For offshore wind energy projects, qualitative aspects such as system integration and ecology could be taken into account as part of the ranking (a comparative assessment). 

The Netherlands Enterprise Agency (RVO) will conduct the bidding procedures and tender rounds for the CfDs and manage the CfDs. The ministerial regulation shall set out the conditions for the competitive bidding procedure, including any additional ranking criteria.

Production-based

The Minister has opted for a production-based CfD, meaning that support payments are calculated on the basis of the kilowatt-hours of electricity actually generated. 

As an alternative for the production-independent CfD, the Minister continues to explore a production-independent CfD for offshore wind for the period after 2027, whereby payments are made on the basis of a reference volume (a potential production) and not on the basis of the actual production.

Contract duration

The Minister intends to apply a contract duration of 15 years for onshore renewable electricity and 20 years for offshore wind energy, with the possibility of one year of banking, which intends to enable producers to manage their yearly fluctuations in output over multiple years.

PBL invited market parties to respond to the proposed contract durations in the market consultation.

Base energy price

The Minister has opted for a base energy price for CfDs, which is familiar to the SDE++. In case of electricity prices that are lower than the base energy price, the difference between the reference price and the base energy price is not paid to the producer. As a result, the government’s expenditure is limited in case of low electricity prices.

The level of the base energy price for CfDs is yet to be determined and will not necessarily be the same as the base energy price under the SDE++.

Partial compensation for negative prices

According to the Letter to Parliament, the European Commission determined that no support payments may be made in respect of electricity generated during periods of negative electricity prices. However, the Minister notes that negative prices and uncertainty regarding how frequently negative prices will occur affect producers' business cases. Therefore, the Minister is considering partial compensation for lost revenue due to negative prices. The Letter to Parliament notes that the compensation considered is partial and not full, to ensure that market incentives for storage and self-consumption will remain. 

During the Meeting, the Ministry stated that it is still conducting research into the manner in which the partial compensation will be structured and that the input provided in the market consultation will be taken into account in the decision-making process. Market parties are invited by PBL to provide their views on how the CfD instrument should address negative electricity prices and increasing price volatility in order to safeguard both system integration and investment certainty.

Carve-out

Under the intended CfD instrument, producers may opt for a "carve-out" during the bidding procedure and exclude part of their generation capacity from the CfD contract for the entire contract duration. 

According to the Letter to Parliament, the carve-out option will enable producers to retain the ability to continue to benefit from long-term contracts on the market (such as (corporate) power purchase agreements ((c)PPAs)) and to use part of the generated electricity for the production of renewable fuels of non-biological origin (RFNBOs). RFNBOs are synthetic fuels that are produced using renewable energy but that are not derived from biological sources such as biomass. For example, hydrogen produced by an electrolyser using electricity purchased from an offshore windfarm could qualify as RFNBO if all applicable criteria are met. If there is no direct physical connection between the fuel producer and the renewable electricity producer, the requirements to qualify as RFNBO include that the installation generating renewable electricity has not received support in the form of operating aid or investment aid (excluding certain exceptions). The Letter notes that the government therefore takes the RFNBO requirements into consideration when deciding on the mechanics of the CfD and is in discussions with the European Commission regarding the ongoing assessment of the requirements. 

According to the Letter of Parliament, producers that opt for a carve-out receive a higher ranking in the bidding procedure, as they require less support. The manner in which the carve-out will be taken into consideration for the purpose of ranking bids in the bidding procedure is unclear. In the market consultation, market parties are invited to provide their views on the possibility of a carve-out within the CfD instrument and to what extent they expect developers to opt for a carve-out.

Inflation correction

In the Letter to Parliament and during the Meeting, the Ministry observed that delays in or the non-realisation of energy projects could expose the developer to financial risks in the period between the determination of the strike price and the final investment decision and could lead to substantial societal costs. Therefore, the Minister stated that it intends to apply an inflation correction to the bid amount in respect of the first two years following the bidding procedure. During the Meeting, the Minister explained that PBL will incorporate the inflation correction into the maximum bid amounts (the maximum strike prices) for the year 2027.

According to the Note and the Meeting, the Ministry intends to determine the inflation correction on the basis of the harmonised index of consumer prices (HICP) for the Netherlands in the two years following the bid.

In the market consultation, PBL invites market parties to respond to, among other things, the question whether this method of inflation correction sufficiently mitigates the risks of inflation shocks and whether the HICP for the Netherlands sufficiently aligns with potential inflation shocks or whether a different (combination of) index(es) would me more appropriate.

Feed-in tariff

The Netherlands Authority for Consumers and Markets (ACM) is currently exploring the introduction of a feed-in tariff for producers. It is not yet clear whether a feed-in tariff for producers will be introduced and, if so, what the structure will be and to whom it will apply. For this reason, the Minister stated that it is not yet clear how the feed-in tariff will be addressed in the CfDs, if the feed-in tariff for producers will indeed be introduced. According to the Letter, when there is more clarity regarding the feed-in tariff, the government hopes to be able to communicate the impact of the feed-in tariff on the CfD's as soon as possible. 

Next steps

Any party may submit its views on the intended CfD instrument through the market consultation until 17 April 2026. Following the market consultation, PBL will issue its advice on the CfD 2027 to the Minister. The PBL advice will cover the categories offshore wind, onshore wind and solar PV. In addition, the PBL advice will cover the categories wind on inland waters and hydropower. The PBL advice for the SDE++ 2027 scheme covers all other categories supported under the SDE++.

The final decisions regarding the mechanics of the CfD instrument will be made on the basis of, among other things, PBL's advice and developments concerning the SDE++ and TOWOZ, and the details of CfDs used to provide support to produce renewable energy in other countries.

During the Meeting, the Ministry noted that the CfD legislative proposal is expected to be submitted to the Parliament before summer 2026. The Minister intends to initiate the first tender for the CfD instrument in autumn 2027. The exact timeline will depend, among other things, on the legislative process by the Dutch government and the state aid approval process by the European Commission.