United Kingdom

United Kingdom

Auction prices higher still

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The latest auction of green electricity in the UK reveals that prices for renewable energy are continuing to rise. Electricity retailers were bidding for electricity from renewable energy plant that hold contracts under the now obsolete Non-Fossil Fuel Obligation (NFFO). The 241 contracts on offer -- with a combined capacity of 609 MW -- were won by 12 successful bidders. The six-month contracts are for electricity produced between October 1, 2002 and March 31, 2003.

Prices averaged £0.065/kWh, a slight rise over the average price in the previous auction in January of £0.0644/kWh. Wind capacity reached an average price of £0.0665/kWh -- up from £0.0631/kWh. It was the first auction held since the government's Renewables Obligation, which replaces NFFO as a system of support for renewables, came into effect. The Non-Fossil Purchasing Agency, which conducted the online auction, explains that the prices reflect the market value of Renewable Obligation Certificates (main story).

Jonathan Johns of Ernst and Young is not surprised at the current high level of prices in the auction. He says they would be higher still if all electricity retailers were actively trying to meet their obligations to buy green. "I think some people are putting off the evil day." Others, he believes, will opt simply to buy-out of the obligation at £30/MWh, as allowed under the Renewables Obligation rules -- rather than take part in the scramble for renewables.

He says the gap between the prices for landfill gas and wind power has narrowed as suppliers appear to be placing a higher value than previously on wind energy. The reason appears to be that retailers place a higher value on wind generation during the winter months, which is less intermittent than in summer, he adds.

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