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Review of new electricity trading structure denounced
1 August 2001
Renewable energy companies are pessimistic that any effective change will be made to the new electricity trading arrangements (NETA) as a result of a review being carried out by the energy regulatory authority, Ofgem. "NETA is going to be reviewed by the same people who have set it up," points out Tessa Lyle from wind farm operator Cornwall Light and Power. "It's no reflection on Ofgem's expertise, but to review the system satisfactorily you have to bring in someone who has not been involved in its creation -- it's a basic principle." Rupert Fraser of renewable developer Fibrowatt warns: "The government's 10% renewables target will be in tatters if we do not get some action soon. Developers will not bring projects forward unless the damage to small players from NETA is alleviated." A fundamental change to NETA initiated by government is required, adds David Green from the combined heat and power (CHP) industry. Over 25 electricity market players with renewable energy and CHP interests -- including companies as large as ScottishPower, Innogy and Northern Electric -- have attempted to inform Energy Regulator Callum McCarthy of their concerns about the negative commercial impact of the new electricity trading arrangements on their businesses. The companies told McCarthy that NETA had disproportionately devalued the output of over 2000 small generators and discouraged electricity companies from buying power from renewables and CHP plant. Moreover, large generators were being cross-subsidised from a "beer fund" in which the surplus imbalance costs recovered from all market players are shared out among a few big companies. But McCarthy may have missed the major point of their arguments, fears Lyle. "In his summing up, Callum McCarthy seemed to me to suggest that the main complaint was that the wholesale price of electricity was coming down," she says. "Whereas my perception was that the spokesmen for the companies were making quite specific points about the way the market is simply not working for CHP and other renewables, citing, for example, impossibly high prices for top up and standby energy and the difficulty of selling spill at all," she says. Ofgem is to report back to government in August.
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