Wind energy is split into two bands: 33 larger projects of over 0.995 MW declared net capacity (DNC) (2.3 MW installed capacity) and 36 smaller schemes of up to 0.995 MW DNC. The government set the small wind band to increase diversity of generation. It also hopes it will stimulate interest in community ownership of projects. Prices for wind start at just £0.0243/kWh in the large scale band, rising to £0.031, with an average of £0.0288. Small scale projects range in price from £0.034 to £0.046/kWh.
Other technologies supported are landfill gas, hydro and waste -- with and without combined heat and power (CHP). The average price of all renewables is £0.0271/kWh. Some projects have already achieved the government goal of convergence with the market price of electricity. This is usually taken to be the price of power sold through the electricity pool, at present around £0.0267.
Energy and industry minister John Battle called the prices "absolutely amazing." He explained that when he launched the NFFO-5 competition, he had expected some further price reductions from earlier orders. "However, they have exceeded my expectations and reflect well on an industry determined to make renewables competitive with other sources of energy," he said.
Public electricity suppliers will now sign 15 year power purchase contracts with renewable developers. A lead-in period of five years will allow developers time for commissioning of plant. Some contracts will start as early as this December
Sensitivity called for
An extra 1.4 million homes around the UK could be powered by electricity from renewables as a result of NFFO-5, said Battle. But he warned that he expects high standards of environmental performance from all renewable developers, adding pointedly: "I am confident the wind energy industry can be relied upon to develop their schemes with care and sensitivity to local concerns."
The British Wind Energy Association (BWEA) welcomed the NFFO announcement. "The new projects have the potential of powering half a million homes," said new BWEA chairman David Still. "This is in addition to the UK's existing 40 wind farms which already generate enough to meet the needs of over 200,000 households," he added. The average cost of these latest projects is a as low as £0.0288/kWh. This compares with an average price paid by regional electricity companies of around £0.035/kWh.
In setting the order, Battle largely ignored the advice of Electricity Regulator Stephen Littlechild, whose recommendations for NFFO-5 relied more on price than diversity. None of the small-scale wind schemes would have qualified under Littlechild's suggested selection of projects. Hydro, also, would have been left out altogether.
The Regulator's zeal in championing the lowest cost options has even led him to question the government's aim of generating 10% of UK electricity from renewables. Meeting the target would require continued NFFO support for on-shore wind, offshore wind and energy crops. However, this could cost some £11-£15 billion over 15 years, warns Littlechild. "It is for consideration whether the benefits of renewable energy justify incurring costs on such a scale," he adds.
The renewables industry disputes his figures. Consultant David Milborrow explains that Littlechild is anticipating a drop in pool prices -- used as the basis for calculating the cost of the NFFO. "There is absolutely no evidence that pool prices will fall when the trend is definitely upwards." He adds, moreover, that the regulator makes no allowance whatsoever for further reductions in the price of renewable energy.