Uncertainties are obstacle to new renewable energy projects, conference told

Delegates attending the Renewable Energy Projects conference in London this week, were told that too many uncertainties currently existed to encourage the development of new renewable energy projects. Peter Fardy, business development director of First Renewables, an investor and operator of renewable energy projects, said the delay in the introduction Renewable Obligation Certification had created a “Green gap” and that he would not expect developers to sign up to new projects for a further 18-24 months.

Fardy said that the introduction of the UK New Electricity Trading Arrangements (Neta) in March, had caused problems for renewable energy producers. He cited the reduction in base price, the complexity of Neta which had a disproportionate affect on small producers and the imbalance charges which affected the profitable operation of inflexible or unpredictable generators.

David Milborrow, an author and consultant in the renewable energy industry, told the conference, “Renewables are caught in the crossfire arising from electricity privatization – the promotion of competition leads to fragmentation and the loss of aggregation makes it harder for individual suppliers to match supply and demand.” An analysis of the value of wind energy during the first week of the Neta in the UK concluded, “The most profitable way of operating wind farms was to switch them off”, said Milborrow.

The problems arising from the Neta were recognized early on and industry regulator Ofgem is carrying out a review on its impact on small generators. Ofgem is also responsible for the introduction and administration of the Climate Change Levy exemption for renewables and for enforcing the Renewables Obligation.

Ofgem is expected to issue Renewable Obligation Certificates (ROC) in October this year. An exemption will be available for qualifying renewable energy production – sources of energy other than fossil or nuclear fuel including non-fossil derived waste. The qualifying generator will be issued with a Levy Exemption Certificate (LEC). Suppliers will be required to pay the Fossil Fuel Levy, which can be offset by LECS, sold to them by qualifying generators.

Suppliers will be permitted to buyout their renewables obligation with a price set at 3p per kWh. Another speaker, Guy Nicholson, managing director of electrical engineers Econnect, called for greater support for the renewables industry by way of a 6p buyout price which would drive up the value of ‘green’ electricity.

The delay in implementing these new arrangements following the introduction of the Neta has, according to Peter Fardy, created the “Green gap” and he fears that the introduction of the renewable obligation may be delayed further making it more difficult for the renewables sector. In the long term, he saw considerable value in ROCs and LECs as greater value was put on emission reduction, clean technologies, security of supply and reduction on fossil fuel usage.

There was general support for the recently announced government energy review although concern was expressed that the conduct of the review might delay the renewables obligation implementation thereby widening the “Green Gap”.

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