CPRE commissioned Catherine Mitchell of the Science Policy Research Unit at the University of Sussex to look at ways of improving the Non Fossil Fuel Obligation (NFFO) -- the current system of support for renewables -- and to suggest options for financing future renewables developments. At first glance financing and planning of renewable schemes may not appear to be an obvious area of interest to a countryside group. "It is quite a discrete area that we do not always go into," admits Matson the CPRE's energy campaigner. "But we see both of those issues as influencing the way in which renewables are developed and in particular their effect on the environment."
The timing of the report's publication in late August is curious. CPRE claims it is responding to the invitation from the Department of Trade and Industry (DTI) to comment on the structure of future NFFO orders. However, with details for bidding under the next tranche of contracts -- NFFO-4 -- due out this month, there was scarcely any time for the DTI to take account of the report's views.
Mitchell's report, Renewable Energy in the UK: Financing Options for the Future, sets out measures for improving financial support for future renewables projects. These include:
¥ greater certainty of financial support for renewable developers to encourage more acceptable schemes
¥ shortening the two year gap between NFFO rounds to one year to stop projects coming forward in "waves"
¥ co-ordination of NFFO procedures with the planning process
¥ improved national planning guidance for renewables
¥ options for financing renewables post NFFO, such as a levy or energy ta
x¥ prices that reflect the value of renewable electricity or green tariffs.
The report looks at experience to date with the first three rounds of NFFO to see what improvements could be made. It points out that NFFO has been extremely successful in delivering new renewable technologies and driving down costs. Nonetheless, it has its problems. Shortcomings in the first and second NFFO rounds have led to public concern about landscape impacts of new renewable technologies. The 1998 end date for contracts and long delays between tranches, coupled with competitive bidding, have all contributed to serious public confrontation about the environmental implications, particularly in relation to wind.
While NFFO-3 resolved some of the old problems, it also created new ones. In particular, the order was so heavily oversubscribed that a huge amount of time and effort was wasted on applications which did not succeed in securing contracts.
Drawing on these past lessons the report highlights two fundamental requirements for NFFOs 4 and 5: greater certainty and better co-ordination with the planning process. To increase certainty and give developers more confidence in the NFFO system, Mitchell makes several recommendations: more frequent orders by having two application dates for each round of NFFO; a simplified application procedure; clear guidance a year ahead on which technologies will be supported as well as the sizes of different technology bands; and a two-tier "will secure" test -- including a simpler test for experienced developers and for projects with planning consent and financing in place. She also calls for the government to provide more guidance on prices by revealing what it considers to be the level for convergence with the market price of electricity.
To ease some of the problems encountered by planners and communities near renewable energy sites -- caused by the competitive nature of NFFO -- the report argues for improved national planning advice for renewables and sound local development plan policies which are co-ordinated between local planning authority areas. Moreover, requiring planning permission as a pre-requisite before a NFFO application would weed out environmentally unacceptable projects before contracts are awarded, it states.
Changes within the law
Mitchell points out that existing NFFO legislation is flexible enough to give considerable scope for changes to funding arrangements for renewables. "This means that creative thinking concerning changes to the procedures of future NFFO orders or other future means of supporting renewables could be accommodated without recourse to new legislation," she says.
Looking beyond 1998 when the government plans to make its final NFFO order -- NFFO-5 -- she claims there is a strong argument for continuing financial support for renewables. She believes renewable electricity will need a guaranteed buyer since it will not be able to compete fully with other electricity sources for some time to come. However, 1998 also sees the start of a completely free market for electricity in Britain as the final element of electricity privatisation falls into place, with the regional electricity companies (RECs) losing their domestic franchise market. This should allow renewable generators to sell to buyers other than the RECs, which they are restricted to at present. Yet Mitchell says that institutional and technical barriers need to be moved before all consumers can contract for electricity direct with any renewable generator and across any REC boundaries.
The report puts forward several suggestions for meeting the extra costs of continuing support for renewables. These boil down to a levy or energy tax which could also support further renewables R&D and would reflect external costs of conventional generation; paying a price which reflects the value of renewable electricity to the system; green tariffs which allow consumers to opt for higher priced renewable electricity; or incentives to the RECs to buy renewable electricity. To bring about these changes the Electricity Regulator, Stephen Littlechild, must ensure easy grid connection, transparent prices and fair use of the system, the report concludes.