Thursday 16 December 2010

REA highlights dangers in electricity reform

The Renewable Energy Association has said the government's proposed Electricity Reform will remedy the UK's status as a renewables "laggard".

Chief executive Gaynor Hartnell said: "Confidence in being able to enter long-term, secure contracts for renewable energy will help stimulate a wave of low carbon investment and jobs, encourage innovation and get the best value for money for consumers."

On plans to phase-out the Renewables Obligation, she said: "Given the UK needs to achieve the fastest increase in renewable electricity deployment in Europe, any uncertainty that stalls investment would be disastrous. The support mechanism has been in almost perpetual change since 2002, and so transition arrangements must be handled with great care."

But she added that "if the RO goes, the UK may need to bring in priority access for renewables.Under the RO, all renewable generation had a market because supply companies needed the certificates.Under the new proposals, it may be necessary to give renewables priority dispatch, as seen elsewhere in Europe."

And she advised caution on proposals to auction contracts for renewable generation. "In theory, competitive bidding can lead to price discovery, which can be more effective than employing consultants to give their views," she said.

"But there are dangers.Those with experience of the predecessor to the Renewables Obligation, which involved competitive bidding, will be well aware of where the problems lie. Auctions would have to be frequent, with a timetable stretching out years in advance. A stop-start regime would be no good. If all consents have to be in place prior to bidding, developers will only engage if they are very confident of winning a contract.These details and many more will need thorough consideration."

Hartnell added that "it is important that market reforms help ensure that the wholesale electricity price reflects the true cost of providing low carbon electricity. The carbon price floor should help in this context, but any revenues must be used to support green energy, and not simply go into general expenditure in the way of a stealth tax."