Access to funding is based around the type of technology used. Onshore wind projects will be able to bid for a share of the £50 million budget set out for "established technologies" each year.
Less established technologies, including offshore wind, will have an annual budget of £155 million from 2016.
The funding is for the first allocation round, which will give renewable energy projects the opportunity to compete for contracts in the autumn. The contracts guarantee prices for the electricity produced.
Strike prices, set last year, guarantee £95/MWh for onshore in 2014/15 and offshore projects will receive £155/MWh. The prices will decrease to £90/MWh and 140/MWh respectively by 2018/19.
Projects will be split into three groups:
- Group 1 is for established technologies, including onshore wind. These projects will receive lower strike prices in the contract for difference scheme.
- Group 2 will be made up of less developed technologies, such as offshore wind, and will get higher strike prices. The third group will be for biomass conversion projects.
In April, the UK government announced five offshore wind developments had qualified to claim the guaranteed prices for electricity in an early, non-competitive round of funding.
Decc believes the CfD scheme will encourage investors to commit to the renewable sector and will drive competition among projects, in a bid to lower energy prices.
Yesterday, the European Commission approved the contracts for difference and capacity market schemes, saying they were in line with EU state aid rules.