A continuing obligation on public electricity suppliers to take renewable energy is needed to keep up the growth of Britain's renewable energy industry, says the Association of Electricity Producers (AEP). But it warns that the government's present mechanism for renewables support -- the Non-Fossil Fuel Obligation (NFFO) -- is not wholly suited to the liberalised electricity market.
In its new renewable energy policy, titled Renewable Energy -- building on success, the AEP calls on the government to consider future support through a "percentage obligation" on electricity suppliers to secure a set proportion of their needs from renewable sources. The obligation would be increased over time. The association also favours renewable energy credits which could be traded between suppliers. And it recommends a minimum UK government target for renewables of 10% of electricity needs by 2010.
Meantime, the government should confirm its plans for the fifth round of NFFO. This should include a rolling "open" band for technologies that are closest to converging with the market price for electricity. Benefits of being connected into the low voltage distribution network should be recognised and paid for. In Scotland, the association would like to see a better indicator of market price for electricity against which the extra costs of renewable energy to the consumer could be judged correctly. To the frustration of renewable generators, the present reference price used by the Scottish Office is calculated on the displaced cost of coal fired generation at Longannet power station and is not an indicator of true market price.
The NFFO-5 announcement should be accompanied by an indication of plans for a continued statutory obligation, says the association. Uncertainties over the future of renewable energy support are damaging the industry, it claims -- though the uncertainty is perhaps less since the change of government. Labour has previously promised to continue NFFO. Problems with the existing NFFO should be reviewed and dealt with, says the AEP.
At present, the NFFO obligation is placed on the monopoly public electricity suppliers (PESs). The AEP argues that this set-up would be inappropriate from 1998 when the PESs will have to compete in the open market. Moreover, NFFO stimulates only the generating side of the market instead of stimulating demand for green energy. The AEP also cautions that some renewable technologies may find it difficult to maintain the rate of price reductions that NFFO requires. This is partly because the best sites -- particularly for wind and hydro -- have already been taken.
The AEP's favoured alternative to NFFO, the "percentage obligation," would spread the cost of supporting renewables to all licensed suppliers, it explains. In addition, it is pressing for a nationwide obligation to encourage development of technologies best suited to each geographical area. The environmental costs of electricity production should be included in more polluting forms of generation, believes the association. While accepting that these costs are difficult to measure, it calls on the government to look more closely at internalising them.
The decline in the government's research and development for renewable energy also comes under fire in the policy document. The association recommends the government reviews its R&D funding for renewables to ensure that promising technologies not yet ready to survive in the competitive world of NFFO are not overlooked.