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United Kingdom

Clear renewables policy still awaited

An eagerly awaited consultation paper on the future of renewable energy in Britain was due to appear at the end of last month. But now the government stands accused of ditching its manifesto pledge to boost renewables. The British Wind Energy Association (BWEA) and Greenpeace warn that the 10% target for renewables has become victim to inter-government departmental wars -- notably among the Department of Trade and Industry (DTI), the Treasury and the Department of the Environment, Transport and the Regions (DETR).

The story of government duplicity broke in the Independent newspaper in late March, just as DTI officials were saying the consultation paper might not be released until April. The consultation will examine how support for renewables is to continue, effectively replacing the DTI's review of renewable energy -- ongoing for the past 21 months -- which many in the industry had hoped would by now have led to a renewable energy policy.

The newly erupted controversy centres around the Independent's claim that the DTI has produced two versions of its consultation paper -- one with a strong commitment to the 10% target and one without. A DTI spokesperson, however, claims the DTI is working on one document. "We are looking at what will be necessary to achieve 10% from renewables by 2010." He refuses to comment on conflicts with other departments, but adds there have been "hundreds of drafts" so far.

Nick Goodall from the BWEA fears the DTI's plans for renewables are being thwarted by the DETR and Treasury who are convinced they can achieve their emissions reductions commitments through other measures. "It has been clear for some time there are some major ideological problems," he says. "But we cannot afford not to have a numerical target."

The need for the consultation paper was sparked by the government's Energy White Paper in October 1998. This signalled major reform of the UK electricity market, including new trading arrangements in England and Wales to replace the electricity pool and the separation of supply and distribution. These changes raise two key questions for renewables' support: on whom should the obligation to buy renewable power fall when the Regional Electricity Companies' (RECs) supply and distribution businesses are separated? And what should replace pool selling price as the reference price for setting the size of the fossil fuel levy? Today RECs are obliged to buy renewables through 15 year power purchase contracts awarded under the competitive Non-Fossil Fuel Obligation (NFFO). The premium prices paid come from the levy.

Condemnation

Greenpeace has been the most outspoken in its condemnation of the government to back its promises. Other commentators fear the needs of renewable generators are being squeezed further in the review of electricity trading arrangements (RETA). Adrian Lloyd from Impax Capital is concerned that the proposed trading system is designed with large scale centrally despatched generation in mind and does not accommodate the needs of small scale generation. The proposal, which closely follows the structure of Scandinavia's Nord Pool, is for a futures market, a bilateral market operating from at least 24 hours up to four hours ahead, a balancing market operating from four hours ahead to real time, and a settlement process.

Most of the contracting is likely to be encouraged to take place in the bilateral market, with consequent penalties anticipated for trade conducted in the balancing market. This would hit small scale generation hardest -- and particularly renewable energy with its unpredictable or intermittent supply. Unless special exemption from penalties are negotiated for small generators, the proposed trading arrangements could leave renewables forever dependent on NFFO, even those who have achieved convergence with market prices and are willing to compete in a fair and open market, warns Lloyd.

"The RETA process is leaving renewables behind despite protestations from the renewables community. It is obvious we will be dealt with only as an afterthought; we are not central to this process," he concludes.

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