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United Kingdom

Too soon to cast renewables adrift

Optimism over the opportunities for renewable energies in the UK liberalised electricity market should be tempered by realism. Niche markets must be developed by renewable energy traders, but meanwhile there will still be a pressing need for a form of renewables support after the Non-Fossil Fuel Obligation. These were some of the key conclusions of a conference on Renewable Energy at London's Cafe Royal.

In spite of an impressive line-up of speakers that included shadow energy minister John Battle and Enzo Millich, head of renewables at the European Commission's energy directorate, only 55 people attended the two day conference held November 4-5. A possible explanation for the poor turn-out could be that it was overshadowed by PRASEG's conference (see previous story) a mere five days before.

Setting the scene, Martin Alder from the Renewable Energy Company claimed that mature renewable technologies would be able to survive in the open market after 1998 without support. But before they are able to do so, the full quota of "'embedded" benefits from renewable generation must be recognised in the price they are paid.

With growing competition for electricity customers after 1998, supply companies will try to differentiate themselves, he said. Tactics already being considered include a "one stop shop" for all utility purchases, and some major retailers are keen to add electricity sales to the services they offer. Suppliers of renewable energy will have to do more than merely rely on the environmental friendliness of their product if they are to succeed, he warned. Marketing and costs are going to be a serious issue. Renewable suppliers may have to form strategic alliances with consumer lead companies to establish a market niche.

Catherine Mitchell from the Science Policy Research Unit (SPRU) of Sussex University took a cautious view of opportunities post-1998. Renewable energy will find it very hard to survive without some form of support mechanism, she claimed. She called for an obligation on all electricity suppliers to take renewable energy. "For renewable energy projects to be developed they need a contract of sufficient length and a reasonable price to ensure finance," she said.

With the exception of renewable energy traders, there are unlikely to be enough contracts at a reasonable price in the post 1998 market to keep up the momentum of renewables development that exists under NFFO, she said. In spite of the increase in the market for renewables as customers opt to buy green electricity, there must be more support than energy trading can offer, she believes. "It would be asking too much of renewables too soon if they were expected to survive post-NFFO with only renewable energy trading to support them."

However, Mitchell warned that support through NFFO could take electricity away from renewable energy traders. "While the two can exist in tandem, a mechanism such as the NFFO would reduce the available electricity for renewable electricity traders."

Turning to the role of the Office of Electricity Regulation (OFFER), she argued that the electricity regulator should place as much importance on his responsibilities towards the environment as towards competition and equity. "If this were the case many important issues with respect to renewables would fall into place. Economic and environmental regulation would work more closely together," she said. "Renewables could be assured of a reasonable price with a reasonable contract for their electricity, equivalent to their value to the system."

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