United Kingdom

United Kingdom

NFFO-contracted renewable energy auctioned at bargain prices

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Renewable energy was sold off at bargain prices in an auction of capacity contracted under the Non-Fossil Fuel Obligation (NFFO) support mechanism. The open-ended on-line auction took place over two days in February. Eleven bidders secured the 525 MW of output from around 199 renewables power plant supported under the third, fourth and fifth rounds of NFFO. Contract prices ranged from a low level of £0.0155/kWh up to a high of £0.0215/kWh, with an average of £0.0189. The lowest was for municipal and industrial waste, reflecting the uncertainty over whether it will be among the renewable technologies eligible for exemption from the new Climate Change Levy (CCL), which will add £0.0043/kWh to the electricity bills of the business sector from this month. Wind commanded an average price of £0.0185/-kWh. According to Andrew Wood from the Non-Fossil Purchasing Agency, which conducted the auction, there was little evidence of any discounting for wind despite new electricity trading arrangements (NETA) which penalises non-firm generation. Moreover, the prices are not as low as they look, he adds. They reflect the contract period which runs through the summer months from when NETA started on March 27 until September 30. The auction was held during a period of uncertainty when there was no guarantee that the CCL exemption was available for all the contracted power plant. The auction prices have no bearing on the price actually paid to operators. They will continue to receive their NFFO contract prices. The 11 successful bidders will be able to market the electricity as green power. They represent the spectrum of suppliers, says Wood: regional public electricity suppliers (PES); large non-PES suppliers and at least one small supplier from the green market niche.

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