Although all generators are allowed to sell to suppliers other than the local REC, half-hourly metering is not in place to recognise electricity output from embedded generators. "At the moment most embedded generators sell to the REC, but most would welcome the opportunity to sell to other parties," says Dorcas Batstone from the Office of Electricity Regulation (OFFER). "Second tier [licensed] suppliers always have been allowed to buy from embedded generators but current metering arrangements render that virtually impossible." The solution is likely to involve the installation of half-hourly metering.
The Association of Independent Electricity Producers (AIEP) has been pushing hard for these changes to enable second tier suppliers to buy electricity from non-pool generators. According to the AIEP's David Porter, renewable generators are already thinking about selling their output outside the NFFO premium price arrangements. "In the association quite a few people involved in generating from renewables are looking to trade their electricity in the normal market place," he says. These are developers who hoped to get NFFO-3 power purchase contracts in December but who missed out by fractions of a penny. In addition there are many operators with NFFO-1 and 2 contracts which expire in 1998.
He points out that there are several reasons why embedded non-pooled generation is looking more attractive. First, the low pool prices currently enjoyed by the RECs are only temporary. "The local REC can buy electricity from the pool at average prices of £0.0246/kWh plus uplift charges. At the moment it might say there is no point in paying any more than that because the pool price is fixed. But the price cap expires next year." Porter claims that when pool uplift charges and system management costs are taken into account as well, local generation becomes more attractive. "When you also consider that well-placed local generation can reduce network losses for the REC and save it from system reinforcement, the cheapest renewables can become equally competitive with contract prices for other forms of generation," concludes Porter.