Hope for green energy suppliers under possible new energy trading rules

Suppliers of renewable energy, who have suffered under the New Electricity Trading Arrangements (NETA) – designed to lower prices for customers, could be offered assistance following recommendations published in a report by energy regulator Ofgem, government departments and industry.

Before NETA came into effect in March 2001, new arrangements, known as consolidation services, were agreed in order to allow the electricity output from smaller generators to be aggregated. This meant that fluctuations in prices for renewable energy – which is common with wind and solar, for example – could be reduced. However, an Ofgem review published at the end of August last year revealed that consolidation services “had not yet developed as far as was feasible”, with many smaller generators already tied into contracts pre-dating NETA.

In October, Energy Minister Brian Wilson admitted that renewable energy generators are suffering under NETA (see related story), when Conservative MP Andrew Robathan suggested that CHP and renewables should be taken out of the arrangement. Robathan cited examples of negative impacts of NETA, which included that of a small wind energy producer in Leicestershire for whom the unpredictability of supply from his two 25kW turbines meant that his contract with Powergen had been cancelled in April 2001. Throughout the country, large wind farms had seen a 27% reduction in the price of their electricity, stated the MP.

Overall, wholesale electricity prices have fallen 20-25% under NETA, says Ofgem.

The report has identified the principal obstacle to consolidation as the inability of small generators to sell fixed volumes of energy without becoming a party to the Balancing Settlement Code (BSC) – the rules that govern how electricity is traded, which is not suitable for smaller generators. The report suggests a greater flexibility to the trading arrangements for the output from renewable generators.

“Ofgem supports greater flexibility under NETA for smaller generators to package and sell fixed and unpredictable output separately,” said Ofgem’s Managing Director of Competition and Trading Arangements, Eileen Marshall. “Subject to the necessary rule changes, which are now up to NETA participants to propose, this move will help smaller generators under NETA and encourage the further development of consolidation services.”

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