Renew On Line (UK) 29a

Extracts from the Jan-Feb 2001 edition of Renew
These extracts only represent about 25% of it

4. Scrabble for Green Power

For the moment the easiest way for consumers to help push the process of renewable capacity building on seems to be for them to contract with one of the green power retail companies - the Regional Electricity Companies (REC's) and independent suppliers like Unit(e) and the Renewable Energy Company. As we've noted before (see Renew 128), the problem there is that although demand is rising, with perhaps 20,000 consumers having already signed up, at the moment there is a shortage of sufficient cheap renewable capacity to meet further expansion.

The green power retail companies have had to rely mainly on ex-NFFO 1 and 2 schemes, whose NFFO contracts only ran to 1998, and that resource is limited. Power from subsequent NFFO supported projects has not been available for the green power retail market, since it was already contracted to the REC's and sold to the normal electricity market, mixed in with conventional power. But now, with the NFFO being phased out, power from these NFFO projects is also, in principle, up for grabs.

An auction of NFFO 3,4 and 5 projects was opened up last Nov, with new price deals being arranged. It seems that around 400MW will be on offer overall. The negotiations evidently will continue for some while, and the results, being commercially confidential, will stay under wraps. However Landfill gas projects seem likely to be popular- they make up the largest single group in the ex-NFFO project auction, and they are amongst the cheapest.

The main concern of the green power retail companies in these negotiations will of course be to ensure that they have sufficient renewable sources contracted to meet the demand likely to be created by companies seeking to get exemption from the Climate Change Levy, when it comes into operation in April, and for the Renewables Obligation (RO), which may come into force later this year - Parliament and the EC willing. The ‘RO’ power can of course be mixed in with conventional power, as before. But in addition, the green power retail companies will also look for supplies for the green power consumer market.

As we’ve seen, ex-NFFO 1& 2 projects are fine, but there has been some debate over whether power from the ex-NFFO 3,4&5 project could be seen as truly additional to their RO commitments, or fully eligible for the green power market. The existing contracts for these projects are, in effect, being continued (for 18 years), and the old NFFO contract prices will be honoured, with the fossil fuel levy cross subsidy being continued (up to £150m p.a.).

Given that it is still subsidised, you would think power from ex-NFFO 3,4 and 5 projects should not be used for the green power market - i.e. projects designated for the green power retail market should, in effect, be ringfenced for use only for this purpose - and have to operate independently without subsidy. Otherwise they would get a double subsidy. There certainly seems to be some uncertainty about the right balance between these two markets and how the division will work in practice. Not least since slightly different eligibility criteria apply for exemption from the Climate Change Levy and for accreditation under the Energy Savings Trusts Future Energy scheme and acceptance under the Renewables Obligation (see below). The EST is consulting on these issues. What seems to be favoured is an arrangement with, the green consumer premium, in effect, supporting projects that will fall outside the Renewables Obligation - but it’s still a little unclear how this will work in practice.

Basically though, leaving the details aside, what we are seeing is a desperate scrabble by the REC's and others to get sufficiently cheap renewable capacity contracted, from the still very limited pool of supplies, to try to meet the various pressures put on them. Eventually, these pressures must surely lead to investment in extra capacity. But until that happens, were stuck with a logjam of demands and a looming supply gap. When and if the Renewable Obligation gets through legislation process (and the EU!) and is added in to the mix, later this year or early next year, that will add even more pressure, since it requires suppliers to increase the renewable component in their output to 5% by 2003 and 10% by 2010. However they have to do this while staying below the price cap imposed by the DTI to protect consumers. A tough task.

In this situation, some REC's, desperate for supplies to sell to the green power market, might be tempted to pick up some power from ex- NFFO waste combustion projects, (or new projects), since they offer relatively cheap power. Indeed, with waste combustion placed outside the RO, then, as we noted earlier, this might be seen as an attractive option, providing clear ‘additionality’ over and above RO commitments. So far, very few green power retail companies have opted for this technology, fearing consumer distaste. Only London Electricity and the Renewable Energy Company/Ecotricity have included it in their green power portfolio's - and then only for sales to businesses. Neither has yet offered green power of any sort to domestic consumers. But PowerGen has now broken ranks, and has included waste combustion in its new domestic green power scheme. Others may follow - although it seems that the EST is not keen on this idea.

Certainly negative reactions are to be expected from domestic consumers (and Greenpeace!), and possibly from local authorities. Many have signed up for green power schemes and, as the Climate Change Levy looms, more are likely to follow. Most are already well aware of the waste combustion issue and local opposition to incineration.

The bottom line though is that, while it may be good in environmental terms if waste combustion has had its day as an energy option, unless new renewable projects emerge to fill the gap, it’s going to be even harder to attain the 5% and 10% renewables targets.

Renewables Trading

Final details of the Renewables Obligation are still being thrashed out, via a further consultation exercise by the DTI. The basic idea is that electricity suppliers (e.g. the regional electricity companies) will be required to work towards obtaining 5% of their power from renewable sources by 2003 and 10% by 2010. But not all the power currently contracted for the green power market, or used for the Climate Change levy, may count against the Renewables Obligation, since waste combustion is eligible in the former, but not the latter, and each has different rules about hydro.

If you think that’s confusing, then see our Reviews for the SPRU/ETSU analysis of the complexities surrounding the newly emerging tradable green certificate systems (including the certificates to be introduced with the Renewables Obligation) and the carbon emissions trading systems. Evidently, given that different eligibility criteria and carbon saving factors apply to power from the various sources traded via these arrangements, interchangability will be a problem, especially internationally. Some renewable generators are worried that, although carbon trading could become a significant market globally, the emphasis is likely to be on the cheapest sources. So they may prefer to focus on the green certificate trading.

1m Green Power users in EU ?....and 1 GW to be installed in the US

A dozen major US companies have combined to boost the development of the green power market via a Green Power Market Development group, which aims to develop markets for 1000MW of green power capacity. Companies involved include DuPont, General Motors, and IBM.

Meanwhile a recent survey of public opinion in Europe found that more than half of those asked would be willing to pay a 2% price premium for green electricity. The figure for the UK was almost 5%, while in Germany and Sweden it was over 60%. Nearly 250,000 Germans have already signed up with green power schemes and this is expected to grow to 650,000 over the next five years, with the Dutch not far behind. Add all those up and we should have well over 1 million green power users in Europe by 2005! What about the UK? The survey, by Datamonitor, found that there were only 15,000 subscribers so far in the UK, but this figure was expected to increase to 250,000 by 2005. The full study ‘Marketing Green Energy in Europe’ is available from Datamonitor on 020 7675 for the premium price of £1000! http://www.datamonitor.com

For an useful overview of the green power market see Green Futures issue 24, Sept 2000.

Green Consumer demand leads to new wind farm

A new 20 turbine windfarm is being built in Northern Ireland as a result of demand from consumers under NIE’s EcoEnergy green power tariff. Claimed by the British Wind Energy Association as the ‘first of many turbines (to be) built by customer demand’ it is being built at Lendrum Bridge in Co. Tyrone. Phase one (5.95MW) which comprises 9 turbines, was completed last year, by B9 Energy Services working with Renewable Energy Systems Ltd. They have already collaborated on eight other wind farm projects in N Ireland.

Micro wind

Meanwhile, Largerwey, working in conjunction with NUON, the Dutch Utility, has developed a small 2.5kW windturbine designed for use in cities. A variable speed device, it is very quiet - six were installed on the (flat) rooftop of the Dutch pavilion at Expo 2000 in Hannover. With microgen currently being all the rage, Micro wind power may yet become common place - at least at suitable sites. But see our discussion of Micropower in Reviews.