United Kingdom

United Kingdom

British call for fixed price

A rolling programme of renewable energy support is the best way to deliver the UK government's target of producing 10% of the country's electricity from renewables, believes the British Wind Energy Association (BWEA). The association favours yearly rounds of contracts with differing fixed price tariffs for the various technologies. This would allow the government to extend the range of renewables it supports -- each at different levels of maturity.

"It is important that we create a framework to develop all renewable technologies and see their integrated development," says the BWEA's Peter Edwards. "Our proposal achieves this and we expect that wind energy, being both cheap and plentiful, will make a significant contribution to the government's targets."

Some 350 MW declared net capacity of new renewables will be needed each year to meet the 10% target. The BWEA calls for an annual order of this size with separate technology bands -- each with its own tariff. Developers would need planning consents and financing in place to win a contract. Gaining planning permission before the award of a contract is the key advantage of its rolling programme proposal, believes the BWEA. It means that all schemes that are awarded contracts will be built, unlike under the present NFFO system whereby the government expects a large proportion of projects to fail -- mostly due to lack of planning consent. In the case of wind, the BWEA says its proposal would shift the emphasis away from Britain's windiest, upland sites, and steer developers in the direction of lowland, industrial sites where wind developments are more likely to get planning consent.

Another way to achieve a wider geographical spread of schemes would be to vary tariffs according to region, says the association. Different tariffs could also be used for different sizes of project. As under the existing Non Fossil Fuel Obligation (NFFO), contracts in the rolling programme would run for 15 years, providing valuable security to help developers raise finance. However, it differs fundamentally from the NFFO in that the fiercely competitive element would be missing. The BWEA argues that technologies that have already converged close to the market price for electricity have little to gain from the bidding process. At first, previous NFFO bid prices could be used to set tariffs, while occasional tariff reviews could place further downward pressure on costs.

Contracts would be offered on a first come, first served basis. Schemes that fail to get a contract one year, would be first in line the next year. This certainty of getting a contract would enable developers to plan for the long term. And the stable market created would encourage more manufacturing to take place in the UK, the BWEA believes.

Like the present NFFO, orders would be placed on public electricity suppliers to contract for renewable generation. They would be repaid the additional costs of meeting the orders via the Fossil Fuel Levy. This payment is at present calculated as the difference between "pool" price of electricity (around £0.026/kWh) and contract price. However, the BWEA argues that this reference price should be set higher at £0.035/kWh to reflect the value to the Public Electricity Suppliers of generation "embedded" in their local grid networks. This higher reference price would allow the government to support more renewable capacity without increasing the levy.

The BWEA maintains that the rolling programme commands more support among other renewables trades associations than any other policy option. One of its key advantages is that it does not need primary legislation, it says.

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