Wednesday, 16 May 2012

Electricity Market Reform in meltdown - let's have REAL feed-in tariffs for renewables not nuclear

Independent renewable companies, allied to Scottish and Southern Energy (SSE), have condemned the Government's proposed arrangements for renewables as unworkable. They have branded the Electricity Market Reform (EMR) as a system designed to cover up  subsidies for nuclear power. See

Independent generators have issued a call for a real system of feed-in tariffs for renewable energy, not nuclear power, and not the unworkable and opaque 'contracts for differences' system (allied to a plan to move into 'auctioning' of contracts). They favour the German style system of feed-in tariffs for renewable energy. It is refreshing to have major players in the renewable world openly demanding what we have been demanding for the last 18 months. See the letter in the Guardian (December 2010) which launched the campaign for 'real feed-in tariffs' (or at least this blog!) on 

As the 'real-feed-in tariff' coalition of renewables (as reported) realise, the 'contracts for differences' system was invented as a cover for subsidies to nuclear power, and to ensure that it was more or less impossible to determine what subsidies would be given to nuclear power. Ironically it now appears (see other entries in this blog) that even this system will not be enough for nuclear power either, because nuclear can only be built with what amounts to a 'blank cheque' from the taxpayer or electricity consumer signed, in effect, by the British Treasury. Nuclear power is uncompetitive with renewable energy, including offshore windfarms. 

The Government's Electricity Market Reform (EMR) proposals are in meltdown. 

Renewables do not need blank cheques from the Treasury, but what they do need are real feed-in tariffs. In fact it would be very easy to implement a feed-in tariff for large scale renewables in the UK. All you need do is upgrade the system used to fund small scale renewables that was outlined in the 2008 Energy Act and implemented by a statutory instrument in 2010. See the details on


The ‘real’ feed-in tariff alternative is simple (as exists in the UK in the form of the small renewables feed-in tariff mainly serving solar pv). Feed-in tariff rates are set by the Government for different technologies and electricity suppliers must pay the renewable developers those rates for 20 years. The electricity suppliers claim back the money for doing this from the Office of Gas and Electricity Management (OFGEM). OFGEM then recoups this money via a 'levelised' levy on all electricity consumers.

Of course what does not help is when the Government arbitrarily alters the feed-in tariff rates, as what happened with the solar power pv rate. Fortunately some of the arbitrariness of this decision was overruled by the Supreme Court. In order to build confidence the feed-in tariff scheme for large renewables should work through standard 20 year contracts being issued to developers of schemes above 5 MW in size guaranteeing pre-determined, fixed, prices paid for electricity generation over that period. These contracts can be issued  by the electricity suppliers themselves; indeed the suppliers should be mandated to issue them assuming they conform to regulation as administered by OFGEM. Of course these should be fixed price contracts - let us have none of this confusing, uncertain, and (at least for many independent renewable operators) unworkable 'contracts for difference' scheme proposed by the Government under EMR.

Another great benefit of having a real, German-style, system of feed in tariffs is that they are transparent. Since all contracts for a given technology are for the same price to be paid per MWh generated, OFGEM can issue reports so that people know what schemes will be paid for generating given quantities of energy. This is good governance - but the Government proposals represent distinctly poor governance. 

No comments:

Post a Comment