11 Jan 2002 – UK energy regulator Ofgem yesterday issued an interim report setting out the way in which smaller generators of electricity would be able to compete more effectively under the New Electricity Trading Arrangements (Neta) following criticism that the structure particularly disadvantages generators whose output can be unpredictable.

Those affected are mostly producers of “green” electricity such as wind farms where variables exist which are outside the control of the producer. With the forthcoming introduction of the Renewable Obligation, a significant growth of “green” electricity is required and Ofgem recognises that the trading mechanism must allow for this.

Ofgem plans to issue its final report at the end of the month but admitted that there were shortcomings in the aspect of operation which was intended to allow smaller generators to consolidate power for sale under Neta. Ofgem said it had “put work in hand to facilitate the further development of consolidation options for smaller generators to take effect before April 2002.

The significance of this date is that many generators will be renegotiating contracts with suppliers at this point and up until now Ofgem noted that many contracts in place pre-dated Neta.

The regulator said it had set up a Consolidation Working Group made up of smaller generators, consolidators, suppliers, DTI, DEFRA, Elexon and NGC which has already addressed the technical barriers preventing fixed output being separated from less predictable output which could be sold separately.

Ofgem’s Managing Director of Competition and Trading Arrangements, Eileen Marshall said, “Ofgem supports greater flexibility under NETA for smaller generators to package and sell fixed and unpredictable output separately. Subject to the necessary rule changes, which are now up to NETA participants to propose, this move will help smaller generators under NETA and encourage the further development of consolidation services.”

The UK government has set a target of ten per cent for electricity production from renewable sources by 2010 – up from the present level of 3 per cent.