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United Kingdom

Record prices and record progress -- Market logic in Britain

The price of green electricity in the UK rose to an all-time high in August when an on-line auction of renewable energy contracts secured an average price of £103.50/MWh (EUR 153.87/MWh). The average for wind contracts was £102.30/MWh.

The Non Fossil Purchasing Agency (NFPA) was auctioning some 927 MW in 315 projects supported under the UK's previous renewables support systems -- the Non-Fossil Fuel Obligation (NFFO) and Scottish Renewables Obligation (SRO). The contracts are for power produced from October 2006 to March 2007. The latest price represents a 15% rise over the last auction covering a winter period held in August last year which achieved an average of £90.00/MWh.

The price is made up of the value of Renewables Obligation Certificates (ROCs) on top of the wholesale price of electricity and Levy Exemption Certificates (certificates that exempt green power from the UK's fossil fuel levy on brown electricity). A ROC is awarded to generators for every MWh of electricity generated from a renewable energy source.

The price increase would appear to be due to the current high wholesale price of power from fossil fuel sources rather than a rise in the value of ROCs. Indeed, in the NFPA's July and April auctions of ROCs, average prices were just over £40 per ROC, slightly down from the equivalent period a year ago. This suggests that the shortfall in renewable energy capacity compared with Renewables Obligation targets is not as large as last year's 31% shortfall. The all-time high for ROC auction prices was £52.07 in July 2004.

Moving along

Meantime, the UK has had the best year ever for installation of new wind capacity even before 2006 is out. Eighteen projects, nearly 600 MW, were completed up to the middle of September. They include the UK's largest project so far, Scottish and Southern Energy's 120 MW Hadyard Hill wind farm in South Ayrshire, Scotland. The £85 million project is also the first in Britain with a generating capacity of over 100 MW. The 52 Siemens turbines became fully operational in March.

Indeed, most of the action this year has taken place in Scotland. Npower renewables' 92 MW Farr project of 40 Siemens turbines was completed in the Highlands, while in Moray, Fred Olsen Renewables installed 24 Siemens machines at Paul's Hill in a 55 MW project. The only offshore project to be completed this year was the 90 MW Barrow wind farm off Cumbria, a joint venture between Centrica and Elsam. The 30 Vestas turbines were commissioned in July

Siting consents granted so far this year are on track to match last year's record of 715 MW permitted. Up to September, some 640 MW of capacity had been given the go-ahead. But the permitted projects are only a fraction of the 11,500 MW that is still held up in Britain's notoriously cumbersome physical planning process. A single project accounts for over half of the capacity consented this year. ScottishPower's 322 MW Whitelee wind farm in South Lanarkshire was finally granted consent by the Scottish Executive after the company resolved Glasgow Airport's outstanding concerns about the effect of turbines on air traffic control radar.

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