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United Kingdom

United Kingdom

Regulator under renewables orders -- Government gets tough

The British government is to publish new environmental guidance for energy regulator Ofgem to help meet the country's renewables and emissions reductions targets. The guidance will allow the Department of Trade and Industry (DTI) to beef up the regulator's remit to remove barriers that hinder deployment of renewable energy.

The UK's target under the EU's renewables directive is to meet 10% of electricity demand from renewables by 2010; and in its 2003 Energy White Paper the government set out its "aspiration" for 20% from renewables by 2020. In addition, its Kyoto target is to cut carbon dioxide (CO2) emissions by 12.5% below 1990 levels by 2010 with an even more ambitious domestic aim of cutting CO2 by 60% by 2050.

But the thinly veiled hostility showed towards renewables by energy regulator Callum McCarthy has been at odds with government policy. The regulator, who sees his chief mission as driving down wholesale energy prices, often stresses the higher cost of increased renewable capacity. But the penalising effects of Ofgem's new electricity trading arrangements (NETA) on small and intermittent output makes renewable sources -- and wind in particular -- appear artificially expensive. Government ministers are believed to have been irked by McCarthy's reluctance to radically reform NETA to redress the balance for renewables.

New regulator

McCarthy's days at Ofgem are numbered, however. He is to leave Ofgem at the end of September, to be replaced as chairman by John Mogg, a career civil servant who has spent the past 13 years working at the European Commission. The DTI says it expects Ofgem to help secure government targets on renewables and energy efficiency and remove any barriers within its sphere of influence. Sustainable energy objectives will depend on a reformed energy system which is more diverse with a greater mix of energy, says the DTI in a consultation document on the new guidance. The market is best placed to deliver the required changes, it states. "But the government expects the authority to take steps within its own responsibilities to provide a framework within which businesses and the economy generally are encouraged to work towards the government's overall objectives and targets."

State secretary for trade and industry, Patricia Hewitt says: "We need to make sure we have secure energy at affordable prices, but we need to use energy more efficiently and urgently address the impact we make on the environment." She calls the guidelines: "A practical step to ensure that the regulation of the energy market complements and supports the work necessary to meet our environmental and social goals." The guidelines are a timely reminder to McCarthy's successor that low prices in the short term should not be his only consideration.

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