|
According to the consultancy Cambridge Econometrics,
the UK will not meet its target of obtaining 10% of electricity from renewables
until 2015 - by 2010 it might only make 8%. This, it argued, was principally
because of NETA, the New Electricity Trading Arrangements.
A recent briefing on the first three months of NETA, organised by
the Combined Heat and Power Association (CHPA) certainly suggested that
the system did not seem to be working very well. Indeed it seems to be
even worse than the pool system it replaced. Chris Pym from EERU
reports.
The meeting was led by the member of NETA’s Balancing & Settlement
Code Panel, who was appointed from the renewables and CHP sector. This
panel proposes modifications to the Code. OFGEM decides whether or not
to accept modifications. It certainly sounds like it should!
NETA is byzantine in its complexity. But already emerging from this
complexity are significant failures which are an embarrassment both
to OFGEM and the DTI:
* NETA was supposed to stop pool price manipulation by the big players,
but price manipulation is now bad or worse than before;
* prices were supposed reduce under NETA, but they are higher;
* NETA is bad for small generators (e.g. renewables and CHP);
* the market is not stable, hence little stability for investment.
Some of the problems are just administrative- but none the less significant.
If the buying and selling accounts of big players go out of balance,
they are in effect fined, and the fines go into a slush fund for distribution
to the players whose accounts are in balance. But NETA’s balance
validation system has on occasions gone awry so that the plus and minus
signs on Scottish Power’s buying and selling accounts were transposed
by mistake. This meant that Scottish Power incurred a fine of about
£10m. Other companies also had problems.
Overall, the spread between the buying and selling prices is considered
unacceptably wide and too volatile. Sometimes the selling price is actually
negative, so that generators have to pay to offload their surpluses.
But the big issue is that the big players appear to be able to manipulate
the market by holding substantial power balances themselves. That of
course is what happened so disastrously in California and it was price
speculation using this sort of device that NETA was meant to avoid.
But the companies have put huge resources into preparing for NETA, so
as to be able to play the market to their advantage right from the start
e.g. Powergen employed 200 people preparing for NETA, and holds 500
- 1000MW in reserve.
The main problem for small renewable and CHP generators is that the
anticipated pluses of the Renewables Obligation and the Climate Change
Levy are outweighed by the financial disadvantages of NETA. A spot survey
by CREA showed that time-expired NFFO projects were expecting a 40%
drop in income because of NETA. The high price of gas also means that
power from CHP projects is expensive and big players may refuse to buy
it. In addition, capital investment in renewables projects is harder
to come by than before since banks can see that renewables are losers
under NETA.
Chris Pym
Clearly NETA needs to be reviewed. As we mentioned in Renew 133, in their
new report for the Fabian Society Gareth Thomas MP and Stewart Boyle called
for renewables and CHP to be in effect taken out of NETA - by giving their
output a ‘must use’ status in the market. At the very least
there needs to be a modification to the Balancing & Settlement Code
which would be more favourable to renewables and CHP.
So far the DTI and OFGEM have mainly just suggested that renewable generators
band together to balance out risks from their intermittent supplies. So
far none have- after all it flies in the face of the core NETA idea of
competition. The OFGEM regulator, Callum Macarthy, has argued that ‘if
the government wants to have 10% renewables by 2010.. they have to take
countervailing action.. we shouldn’t distort the system away from
efficient solutions just to boost renewables’. (FT Power UK,
Feb. 2001). But, at the PRASEG conference in July, Minister Michael Meacher
agreed that there was “a real problem with NETA for small companies.
We have got to persuade Ofgem that they have got to be safeguarded.”
Subsequently OFGEM reported that output from renewable generators fell
by up to 14%, due it seems to NETA, and RPA, the new Renewable Power Association
has gone on the offensive calling for action to rescue the situation.
See www, renewablepowerassociation.org More in Renew 135
- With NETA in mind, at the recent PRASEG conference, the National
Grid company recommended small renewable generators to aggregate
themselves into agencies, possible via their local distribution network
operators. In this way renewables might have access both to local distribution
and to grid transmission.
- The NG Co. will publish practical grid connection guidelines soon.
|
