This "sterilisation" of sites is caused by a rule in the government's current support mechanism, the Renewables Obligation (RO), designed to stop project developers from abandoning their NFFO contracts in favour of selling their output more profitably under the RO. But an unintended result of the rule is that if a NFFO contractor fails to build a NFFO project, no other renewable project at that location will qualify for renewables obligation certificates (ROCs). Hartnell explains that NFFO contractors may fail to build for any of a number of reasons. Some projects are no longer economic, while some developers may prefer to devote their resources to more lucrative projects under the RO. She points out that the rule has another undesired effect. Where NFFO and non-NFFO plants occupy the same site, if the NFFO plant does not produce power for a whole month, then the non-NFFO plant cannot claim ROCs.
For the past year, the RPA has been calling for the "site sterilisation" issue to be resolved. The Department of Trade and Industry (DTI) is well aware of the shortcomings of the rule, but its proposed fix, a change of wording, does not find favour with the RPA. While it would give developers reason to complete their NFFO projects, or build in their place, it would not resolve the other unintended effects, she claims.
The site sterilisation problem has arisen mainly from the way in which NFFO contracts are being regulated. "It is unwise to adopt a legislative solution to a contractual problem," she says. "Furthermore, it will encourage NFFO contract holders, site owners and even existing NFFO generators to engage in contractual gymnastics to extricate them from uneconomic NFFO contracts in order to develop the sites under the RO."
With up to 2500 MW of potential renewable capacity currently stymied by the site sterilisation issue, it needs to be tackled, says Hartnell. But a cleaner more transparent means of resolving the problem than that currently on the DTI table would reflect better on both government and the industry, she says.