The Effectiveness of Contracts-for-Difference (CfDs) in Promoting Renewable Energy Investments in the EU Electricity Market: A Comparative Analysis between the Netherlands and Greece

Abstract

This thesis investigates the effectiveness of Contracts-for-Difference (CfDs) as a policy instrument to support renewable energy investment and manage price risk in the EU electricity market. Using a comparative analysis of the Netherlands and Greece—two countries with contrasting CfD designs, market maturities, and risk profiles—, the study combines qualitative policy assessment with quantitative scenario simulations for 2023 (crisis) and 2030 (transition). Results show that auction-based CfDs in Greece rapidly reduced LCOEs and strike prices but increased producer risk, while the Netherlands’ administrative scheme offered stable returns until a recent shift toward two-way CfDs. In both cases, CfDs delivered investment certainty and reduced price volatility, but fiscal impacts and risk allocation depend on careful contract calibration and ongoing scenario testing. The findings underscore the need for context-specific policy design, highlighting the importance of strike price setting, risk sharing, and regulatory stability in achieving efficient and equitable energy transitions across the EU.