Renew On Line (UK) 32

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

CCL and NETA begin to bite

With NETA, the New Electricity Trading Arrangements, now in place, the Climate Change Levy (CCL) in operation, and the Renewables Obligation (RO) soon to be imposed on them, the regional electricity companies (REC’s) are beginning to think about how to restructure their green power tariff schemes. Most REC’s are offering power contracts direct to companies, thus enabling the latter to gain exemption for the Climate Change levy. But most of the REC’s are still also retaining their ‘voluntary’ domestic green power supply schemes, at least for a while, although almost all seem likely to switch over to eco- fund schemes, outside the RO when it comes into force.

Meanwhile the DTI says that, after NETA has settled in, OFGEM will be reviewing the impact of NEA on small generators: renewable projects are expected to find it harder to trade in this new market, so there will remain a scarcity of green power across the board.

Certainly there have already been grumbles from some of the generators. Andrew MacDonald, director of Innogy's renewables division, Concert Energy, told the Telegraph (27/04/01) that, with NETA, the Government was "sending the wrong messages to developers wanting to build renewable and CHP stations". A spokesman for the Combined Heat and Power Association said several of his members were operating on a restricted basis because of NETA, while Powergen had cancelled contracts to buy excess power from Leicester City Council-owned CHP stations, within hours of NETA being switched on last month, quoting "market instability".

However, OFGEM said it was "confident that all the measures were in place to allow participants to successfully participate in Neta". But an analysis carried out by the University of Manchester Institute of Science and Technology on energy prices in the first week of NETA suggested that wind turbines selling electricity into the transmission grid would have made a loss. Under the new arrangements, generators and buyers are required to forecast their supply and demand three and a half hours ahead of delivery. If the actual supply and demand differs from this, they are penalised by having to buy from or sell into a secondary and very volatile ‘balancing’ market. According to the FT (April 19th), since the start of NETA, balancing prices have averaged minus £1 /MWh for sellers and £150/ MWh for buyers. For generators using intermittent sources like wind, things can therefore be very difficult. "The design of NETA is inherently very bad news for renewable generation. The most profitable way of operating a wind farm so far has been to turn it off," said Professor Goran Strbac of UMIST.

Accredited suppliers CCL exemption

OFGEM has produced a list of those generators accredited as qualifying renewable sources for exemption under the Climate Change Levy. So far, 396 generators have been accredited, with a total of 1232 MW installed generating capacity, but more may follow. Output from these generating stations will qualify for exemption from the levy. However accreditation continues and generators are still welcome to apply to qualify for exemption. Over half the installed generating capacity comes from on-shore wind and landfill gas generating stations. A quarter of the total installed generating capacity (54 generating stations) comes from on-shore wind projects and approximately 30% of total installed generating capacity (164 generating stations) comes from landfill gas. 123 small hydro generators have gained accreditation. Other technologies to receive accreditation include off-shore wind, sewage gas and waste plants. Accredited generators will be issued with Levy Exemption Certificates (LECs) for their monthly qualifying output. Electricity suppliers who buy the output to sell to non-domestic customers will not have to pay Levy on that. The supplier may pass this saving on to their non-domestic customers who have signed green contracts. The Climate Change Levy is paid by non-domestic electricity customers at the rate of 0.43p per kWh. Domestic customers are not affected by the Levy.

Levy Exemption Certificates will be used by suppliers as evidence of the amount of renewable electricity they have supplied to non-domestic consumers on which the Levy will not be paid. The published information lists generating stations by name technology, location, generating capacity and the percentage qualifying output. The list can be viewed at www.ofgem.gov.uk/industry/ccl.htm

* Trade associations representing 40 industrial sectors, including steel, aluminium and paper mills, have got 80% exemption form the Climate Change levy, in return for agreeing formal targets with the DETR for cutting carbon emissions and tackling climate change- representing cuts in carbon emissions of over 2.5 million tonnes by 2010, about half the cut expected from the CCL overall by then.