Electricity suppliers to be obliged to buy 10 percent of power from renewables

Speaking at British Biogen’s annual conference, Anna Walker, Director General for Energy at the DTI, said the government would increase the obligation over time and introduce new trading arrangements in order to stimulate competition and bring electricity prices down.

Walker reassured renewable energy producers that existing NFFO contracts would be honoured. “The commitment is that anyone with an existing NFFO contract going forward 15 years will retain that contract. So it’s a long term commitment we’re making.”

NFFO is a scheme by which electricity companies are ‘obliged’ to buy a fixed amount of power from non-fossil power producers.

The Government is also planning an overhaul of the Electricity Trading Arrangements in order to bring electricity prices down, to stimulate the electricity market and to allow the replacement of NFFO. The new arrangements are expected to be in place by October 2000, Walker said.

The new arrangements will entail:

• the abolition of the compulsory pool
• the introduction of bilateral contracts
• a developing spot market
• a balancing mechanism to ensure that peaks of demand are met.

Walker went on to outline measures to address renewable energy producers’ concerns about the new arrangements. Producers are worried that the charges in the balancing mechanism are unpredictable for those who have unpredictable levels of generation.

They are also worried that the terms and conditions under which renewables operators are hooked up to local wires will not be fair.

To alleviate these problems, the government will:

• introduce national aggregation of renewables operators “so that unpredictable renewables operators are not having to predict too far ahead what they are actually going to be able to generate.”
• new utilities legislation due to be introduced in the next Parliamentary session will provide separate licenses for wires businesses and supplier businesses.
• wires businesses will have a duty to operate at the local level. “This will promote competition between different forms of generators so that local generators do not pay unfair share of the cost of using those businesses.”
• local renewables generation targets will be expected to mirror national ones.
• consider increasing DTI funding for R&D
• information campaigns to raise public awareness of the availability of green energy are to be launched.

Walker emphasised that the DTI sees the green market as “essential to the success of renewables” and that it could work with the new trading arrangements. “My own view is that the new electricity regulations would facilitate it,” she told the conference. “Most electricity companies have already launched a green tariff. I believe this will increase as companies become increasingly concerned with their brand name. In other words, I think the market place will militate to help the green market.”

European legislation could further help the cause of renewables by mirroring UK policy and encourage the sector’s expansion across Europe. Walker said she expected to see similar support mechanisms put into place in Europe along with the introduction of trading in green energy.