Extracts from NATTA's journal
Renew, issue 150 July-Aug 2004

10. RO price rises

The Energy regulator Ofgem has set the buy-out price for the third year of the Renewables Obligation at £31.39 per MWh. The buy-out price allows electricity suppliers to make up any shortfall between the amount of their obligation and the number of Renewables Obligation Certificates (ROCs) presented. It is adjusted each year to reflect changes in the retail prices index.  The Government set the buy-out price at £30/MWh for the first year of the Renewables Obligation.  For the second year of the scheme the buy-out price was set at £30.51/MWh. The new rate will apply for the obligation period 1 April 2004 to 31 March 2005. This small increase should help new projects a bit but not much. Although there now seems to be recognition that there is a funding gap for new projects, (for example in the Renewables Innovation Review)  it seems that the government is looking to grants, from general taxation, to provide support for new technologies- it doesn’t want to load the RO up with extra costs which would be passed on to consumers. But one way or another if we want a sustainable energy future we are going to have to pay for it.  The government has indicated that the RO might put prices up by 5% by 2010 and maybe more when other support schemes are included. Lets hope consumers will be happy to pay more for a more secure and sustainable system. System resilience

Certainly, the debate over security and transmission upgrades still rumbles on- how much do we want to pay to keep the lights on reliably?  The power industry had told the House of Commons Trade and Industry Select Committee that domestic consumers might have to  pay £5 a year more over 10 years to ensure system resilience- or £1bn in all.  In its report on the resilience of the national electricity network, the Committee felt that more needed to be done.  However Alistair Buchanan, Chief Executive of  Ofgem, warned that “No electricity system can guarantee 100% security at all times. Consequently, there are important trade-offs between the costs and benefits of spending more to improve security of supply.  Therefore, we welcome the Committe’s view that ‘gold-plating’ infrastructure would not be worth the cost.”

He also said that he was reassured that  “everyone who gave evidence to the Committee agreed that investment levels in the electricity system were comparatively high and that they are being maintained year on year. Since privatisation, more than £16 billion has been invested in the electricity transmission and distribution networks.”

But with blackouts having occurred and more maybe to follow, not everyone was convinced that enough was being done to build a secure and sustainable system. Certainly, in his submission to the Select Committee Prof. Sir David King, the governments Chief Scientific Advisor, argued that, since privatisation, funding for energy R&D  generally has fallen dramatically, but he pointed to the £12m allocated to the UK Energy Research Centre as an example of the right response.