Under the Non-Fossil Fuel Obligation (NFFO) in England and Wales and the SRO, contracts for wind generated electricity are based on a wind farm's declared net capacity (DNC) which is set at 43% of the installed capacity. This wind 'DNC' ratio of 0.43 was originally conceived to take account of the intermittent nature of wind energy and to put it and conventional capacity on a comparable basis -- on average 100 MW of wind is equivalent to 43 MW of coal. In all probability the 0.43 figure was not intended to represent a capacity factor, but nonetheless has become accepted as such and was made a statutory instrument in 1989.
It means that developers are only allowed to contract for 43% of their total capacity at the premium price. In less windy areas of the country this would not appear to be a problem. But in some parts of Scotland where site wind speeds are more than 9.5 m/s, developers will not be paid at SRO bid price for all their energy and will have to sell excess output to the local public electricity supplier at a lower rate of only £0.018/kWh.
If the site wind speed is 10 m/s the shortfall in revenue will be about 3% -- this matters when success or failure in bids for SRO contracts can depend on fractions of a penny. "The SRO is not treating all applicants fairly. By contracting for only 43% of their capacity they are penalising efficient sites that may be more expensive to develop but have a much greater output than less windy areas," says Oldfield. "If we had been allowed to sell all of our output under the SRO then our bid price would definitely have been as low as the average contracted price (£0.0399/kWh) or less. This would compete with other renewables very favourably, as well as competing with other wind schemes."
The effect of the penalty will vary with different types of wind turbine. Developers using one with a low rating for its size would be likely to suffer more.
Oldfield believes it is time for the DNC limitation to be removed altogether or increased to at least 50% for wind power. "If a DNC of less than one is used then it becomes impossible to compare the efficiencies of differing sites accurately. Why should wind power be treated any differently to hydro?" he asks. "After all, hydro power is affected in summer by droughts and in winter by water being locked up in snow and ice."
The British Wind Energy Association has already taken the matter up with the Scottish Office. "It is certainly an issue of which the major developers are aware," says Ray Hunter from the BWEA's Scottish Branch. "On some of their best sites they have had to cap their financial projections. It is not a huge issue, but when we pointed out to the DTI that it is a silly anomaly, they recognised that is the case."
The Scottish Office now acknowledges a remedy is called for and looks set to bring about a change in time for the second round of the SRO. "Serious consideration is being given by the Scottish Office to change the statutory DNC for wind projects. A decision is likely to be made in the near future," says a spokesman.
Another change to the SRO is being called for, too. Special provision should be made for Scottish developers of smaller wind energy schemes under the next Scottish order believes the BWEA. It is concerned that no Scottish developers succeeded in obtaining contracts in the last round of the SRO, announced in December. "All of the successful SRO-1 schemes are large and all are being developed by organisations with experience in England and Wales," says Hunter.
In a series of suggestions to the Scottish Office for improvements to the SRO, the BWEA calls for the wind tranche to be split into three size bands with cut offs of 500 kW and 1.6 MW. It believes this would allow new Scottish developers to gain a foothold in the smaller bands while companies from outside Scotland would be more interested in larger schemes. The smallest band would stimulate the own-generation market, it hopes.
Interestingly, the BWEA also calls for the NFFO and SRO to be combined. It argues that keeping the two renewables markets separate impedes convergence with the market price for electricity. Moreover a restrained market north of the border is a barrier to encouraging manufacturing in Scotland. Because of the larger Scottish wind resource, the BWEA suggests premium priced contracts in Scotland should be increased to 100 MW of declared net capacity each year.
The role of OFFER, the office of electricity regulation, in setting the order comes under attack. It has too much say in deciding which schemes gain contracts, claims the BWEA. OFFER's selection, based solely on the basis of lowest cost to the consumer, does not take other important factors into consideration and will hinder the environmental acceptability of wind energy, the BWEA says. The association also calls for the SRO to be extended to off-grid schemes and asks the Scottish Office to give consideration to the true value of wind energy -- both its embedded generation value and the avoided environmental costs.