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United Kingdom

CONTRACTS FOR NEARLY FIVE HUNDRED MEGAWATT WIN THROUGH

Following the announcements of contracts awarded under both the Scottish Renewables Order (SRO) and the third order of the Non Fossil Fuel Obligation (NFFO -3) in December 1994, some 140 wind projects have been selected. Only around 20 wind farms are likely to be commissioned though. The British Wind Energy Association is pleased about the convergence between the price of wind power and the market price for electricity.

Electricity Suppliers in England and Scotland will be negotiating contracts in the new year for some 490 MW of installed wind power capacity following announcements of both the Scottish Renewables Order (SRO) and the third order of the Non Fossil Fuel Obligation (NFFO 3) on December 20. The impressively low bid prices accepted for wind start at under £0.04/kWh ($0.06/kWh).

Charles Wardle, under secretary of state for industry and energy told parliament that 55 wind contracts are to be let in England and Wales for a princely 166 MW of declared net capacity (386 MW installed capacity). In Scotland 12 wind projects have been approved for power purchase contracts under the first round of support for renewables north of the border. With a total declared net capacity (DNC) of 45.6 MW, wind scoops 60 per cent of the SRO, ahead of hydro, waste-to-energy and biomass, announced Ian Lang, Secretary of State for Scotland.

The spread of wind contracts looks set to boost both large and small developments -- with special provision made for small scale projects. Although 31 of the schemes in NFFO 3 are larger than 1.6 MW (DNC), accounting for 146 MW of the total capacity, 24 contracts for a total of 20 MW have been awarded to projects under that limit. "The government considers it should distinguish between wind farms and smaller projects involving single individual turbines or small clusters of them -- perhaps community based and serving a different market," said Wardle.

Payment for power from large schemes ranges from £0.0398 to £0.048/kWh, averaging £0.0432. For small schemes the range is £0.049-0.0599. In Scotland prices will range from as low as £0.0379/kWh up to £0.0417/kWh with an average of £0.0399.

Wardle revealed that one developer -- known to be National Wind Power (NWP) -- was responsible for such a large number of wind bids that the government capped the number of contracts awarded to the company. NWP, however, with ten projects, still emerges with a significant chunk of NFFO 3 capacity. Wardle defended the capping on the grounds of diversity: "At this early stage in the development of the market for wind, the government believes this diversity is desirable in order not to lose the potential benefits that may arise from a spread of players in this field." NWP has also secured five contracts under the SRO.

A total of 141 renewable projects secured contracts under NFFO 3 for 627 MW (DNC). Hydro, landfill gas, municipal and industrial waste, energy crops and agricultural and forestry wastes are represented alongside wind. In supporting such a wide range of technologies the government has repeated its commitment to diversity. It has also defied the advice of Electricity Regulator, Stephen Littlechild, who recommended a selection based solely on lowest bid price. This would have excluded hydro and energy crops. The Regional Electricity Companies (RECs) will now sign contracts committing them to purchase electricity from the successful developers at a premium rate -- set at the price bid by each project, but averaging £0.0435/kWh. The contract period will last for 15 years, with five years for development.

Wardle is at pains to stress that a NFFO contract does not result automatically in a project going ahead. Successful bidders will need to obtain planning permission, he says. "The award of a NFFO contract is totally without prejudice to the planning-approval process which must be carried out in the normal way." He adds: "The government expects that around 300 to 400 MW of the 627 MW contracted capacity are likely to go forward to commissioning." He predicts only around 20 of the wind farms will be built. Last March energy minister Tim Eggar forecast that only 20 or so wind farms would be built under NFFO 3 -- largely to allay fears over the rash of applications for contracts.

Larger than planned

At 76 MW the Scottish Renewables Obligation (SRO) is larger than originally planned, claims Ian Lang. Last year he invited bids for 30-40 MW of new capacity, but increased this limit, "In view of the price and good quality of many of the bids received." The SRO obliges Scotland's two electricity suppliers -- ScottishPower and Scottish Hydro-Electric to agree contracts with developers.

In setting the order Lang has followed closely the advice of Littlechild, who recommended that contracts be awarded only to the lowest bidders. The only surprise is a contract awarded to a biomass scheme which, with bids for energy crops starting from £0.048/kWh, Littlechild considered too expensive to be included.

The wind energy developers with 12 SRO contracts comprise National Wind Power, owned by utility National Power and construction giant Taylor Woodrow, with five contracts; Trigen, a consortium of American, Japanese and British interests, with three contracts; the UK division of Micon Wind Turbines of Denmark; Renewable Energy Systems, a subsidiary of construction company Robert McAlpine; and small developers Windcluster and Gallow Rig Wind Farm Ltd.

The British Wind Energy Association said the NFFO and SRO announcements were "very impressive." Association director, Michael Harper says he is pleased in particular by the size of the order and the signs of convergence between the price of wind generated electricity and the market price. The inclusion of a band for small wind projects is a "big bonus," he says. Harper points out that at £0.0432/kWh, the average price for wind farms in England and Wales is 50% less than the price of wind energy from the previous round of NFFO. "This is a significant positive boost for wind energy in the UK. Wind energy is now proving itself as clean, popular and competitive in pure price terms."

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