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United Kingdom

Price of popular power

Despite the effects of Britain's new electricity trading arrangements on the value of wind energy on the open market, prices paid for output from wind projects in the latest on-line auction of green energy were some 50% higher than in the first auction in February. The auction was held by the Non-Fossil Purchasing Association (NFPA) to dispose of output from renewable energy projects contracted under the now obsolete Non-Fossil Fuel Obligation (NFFO).

In all, 212 contracts for some 580 MW of green electricity were awarded to 12 successful bidders. The auction took place over seven days ending September 5. The six month contracts will run from October 1.

Encouragingly, wind energy commanded an average £0.0284/kWh -- among the highest prices paid for any renewable technology, although one energy trader suggests this was due to some new and "very inexperienced traders" who have since tried to re-sell the electricity. Two recent developments could partly account for the overall increase in auction prices since February. In April, the introduction of the climate change levy on the business use of energy added £0.0043/kWh to the price of electricity from fossil fuels and nuclear. Electricity supplies from renewables are exempted from paying the tax -- making green power an attractive option.

Adding further value to electricity from renewable energy is the new Renewables Obligation, due to start at the beginning of 2002. This will require electricity companies to contract for an increasing proportion of their supplies from renewables. Andrew Wood from the NFPA expects contracts awarded in the next auction to be held early in the new year will command even higher prices.

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