ENV2E02 Energy Resources

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ENV-2E02 Energy Resources 2004 - 2005
5. Non-Fossil Fuel Obligation
Renewable Obligation
Keith Tovey ?.?.???? ?.?., ?-? ???????????
???? Energy Science Director CRed Project
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5.1 Non-Fossil Fuel Obligation Introduction
NFFO-1

• NFFO-1 Introduced at time of privatisation, levy
  on all energy generated from fossil fuels.
• used to subsidise the non-fossil fuels.
• REC's expected to purchase a minimum percentage
  of their electricity from such sources.
• original proposal seen as solely a subsidy for
  the nuclear industry as there was little
  renewable energy
• .(but needs
  qualification)
• changed to a separate section for Renewables and
  Nuclear,
• Renewables section was subdivided further by
  technology type.

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5.1 Non-Fossil Fuel Obligation Introduction
NFFO-1

• The NFFO-1 (1990) required a minimum contribution
  of 102 MW from new "renewables".
• Fixed price per MWh was paid for renewable
  energy.
• Price paid per unit varied significantly with
  technology
• Wind energy had the highest price at 11p per kWh
• compared to a typical consumer price of 6 7 p
  and a generating cost from fossil fuels of around
  3 4p per kWh.
• a substantial subsidy for wind.
• Potential generators had to submit applications
  for the subsidy,
• many did not receive planning permission,
• or failed through lack of finance.
• Subsidy was paid until 31/12/1998 limit placed
  by the EU

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5.2 Non-Fossil Fuel Obligation NFFO-2

• As with NFFO-1 a fixed price was paid to all
  generating capacity
• NFFO-2 (1991) was further divided by technology
  type

The payments under NFFO-2 expired on 31/12/1998
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5.3 Non-Fossil Fuel Obligation NFFO-3
Note substantial shortfall again
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5.3 Non-Fossil Fuel Obligation NFFO-3
January 1995

• Many schemes failed through planning permission
  etc.
• DTI "size capped" schemes
• Ensured a sensible spread between Technologies.
• Clearance given from EU for NFFO-3 to extend
  beyond 1998,
• (to 30th November
  2014,
• NOTE this excludes NFF0-1 and NFFO-2 projects.
• Unlike NFFO -1 and NFFO-2, price paid for
  renewables was NOT a fixed price.
• Different bids for each supplier within each
  technology band
• Lowest bids got subsidy
• Declared intention of 627.800 MW
• but only 292.584MW by end of 2002.

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5.4 Non-Fossil Fuel Obligation NFFO- 4 5

• NFFO orders 4 and 5 came into force in 1996 and
  1998
• given subsidy for 20 years to finish in 2016 ande
  2018 respectively
• bids significantly lower than for NFF0-3
• Overlap with Renewables Obligation - some schemes
  still coming on line
• Delays in inplementation even after subsidy
  available.

5.5 Non-Fossil Fuel Obligation General
Comments

• In 1995 declaration made by Government to have
  1500MW of new renewable generation by 2000
• by December 31st 2003, figure was only 1058.37MW
  
• a total of 97.92MW under NFFO 1 2 are no longer
  operational

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NFFO Projects in Operation on 31st December 2003
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NFFO Projects in Operation on 31st December 2003
BUT 142 projects with a total of 626.90MW were
contracted Actual installation of Wind is only
28 of contracted figure in 1996.
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NFFO Projects in Operation on 31st December 2003
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NFFO Projects in Operation on 31st December 2003
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NFFO Projects in Operation on 31st December 2003
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NFFO Projects in Operation on 31st December 2003
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Electricity Generation by Renewables 1990 - 2003
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Electricity Generation by Renewables 1990 - 2003
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15.7 Renewables Obligation

• First Consultation - 1999
• Second Consultation - 2000
• Implementation on 1st April 2002
• (one year after NETA implemented)
• NETA favour flexible generators and had adverse
  effects on renewables until RO was implemented
• Aim to replace NFFO and provide a long term
  mechanism to stimulate renewables
• Initial target 10.4 renewables by 2010
• later increased to 15.4 by 2015
• aspiration of 20 by 2020.

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15.7 Renewables Obligation

• On whom should the Obligation be?
• The Generators?
• The National Grid Company?
• The Distributors (e.g. EDF in this region)?
• The Suppliers (not generators) (e.g. nPower,
  PowerGen, etc).?
• The Consumers?

Ultimately it was decided that Suppliers should
be liable and that they would be required to
demonstrate comnpliance
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15.7 Renewables Obligation
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5.9 Renewable Obligation Certificates -Operation
The Regulator OFGEM
Renewable Generator
SUPPLIERS
Trader and Brokers
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5.9 Renewable Obligation Certificates -Operation

• 12 - 18 per MWh Recycled fines

• 1.50 per MWh Embedded benefits - less losses

• 4.30 per MWh Climatic Change Levy

• 31.39 per MWh Value of ROC

• 20 - 22 per MWh Wholesale Electricity Price

Less Neta Imbalance charges 2 per MWh
Value of Renewable Generation 56- 70 per MWh
i.e. 2.5 to 3 times of normal price.
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5.9 Renewable Obligation Certificates -Operation
Auction Prices by Non Fossil Purchasing Agency
Buy out Prices April 2002 3p per kWh April
2003 3.059p per kWh April 2004 3.129p per kWh
This are prices paid for ROCs generated under
NFFO-3, 4 ,and 5 which by themselves do not
qualify for ROCs.
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15.10 Renewables Obligation B B

• Banking up to 50 of certificates in any one year
• Borrowing up to 5 of certificates in any one
  year.
• Since Certificates available fall well short of
  demand, these have not really been an issue.

15.11 Banding

• Some Technologies are more cost effective than
  others.
• Government rejected idea of different level of
  banding for different technologies
• Capital Grants available for 2 technologies

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15.13 Renewables Obligation Amendments

• Amendments 1st April 2004
• Two issues were addressed
• Co-firing
• This involves firing power stations with both
  fossil fuel and biomass (Ironbridge Power
  Station)
• Threshold for ROCs
• Prior to Amendment, a minimum of 0.5 MWh had to
  be generated in each and every month.
• One ROC was allocated for each 1MWh, but an odd
  0.5 - 1 MWh would qualify.

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15.13 Renewables Obligation Amendment

• Co-firing
• Until 31/03/ 2006 all biomass co-firing qualify
  for ROCs
• From 01/04/2006 to 31/03/2011, 75 of biomass
  must come from crops specifically grown for
  purpose
• Co-firing not eligible for ROCs after 31/03/2011
• i.e. agricultural wastes do NOT come into this
  category
• Problem Not sufficient development in crops
• Amendment
• Until 31/03/ 2009 all biomass co-firing qualify
  for ROCs
• From 01/04/2009 to 31/03/2010, 25 of biomass
  must come from crops specifically grown for
  purpose
• From 01/04/2010 to 31/03/2011, 50 of biomass
  must come from crops
• From 01/04/2011 to 31/03/2016, 75 of biomass
  must come from crops
• Co-firing not eligible for ROCs after 31/03/2016

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15.13 Renewables Obligation Amendment

• Co-firing Amendment
• To prevent abuse with most ROCs coming from
  Co-firing
• from 01/04/2006 to 31/03/2011 a maximum of 10 of
  ROCs can be obtained by co-firing
• from 01/04/2011 to 31/04/2016 a maximum of 5 of
  Rocs can be obtained by co-firing
• Many species can be harvested every 3 years
• proposals allow 3 crop cycles during eligibility
  for ROCs

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15.13 Renewables Obligation Amendment

• Threshold for ROCs
• ZICER could not qualify as output in November gt
  February could not be guaranteed to exceed 0.5
  MWh
• Amendment
• Average over whole year to be in excess of 0.5
  MWh per month.
• ROCs based on annual output
• based on number of MWh (odd 0.5 MWh and above
  qualifying)
• Available only for generators lt 50 kW peak

• Further amendments under discussion late 2004
• Renewables Obligation Review 2005 - 2006 terms
  of Reference Published
• One suggestion offset CHP against Renewable
  Obligation
• Would make target more likely to be achieved,
• Would considerably water down renewables
• see DTI Energy Group WEBSITE www.dti.gov.uk/energy
  /renewables