Electricity Trading Arrangements (Hansard, 6 November 2001)

§ Mr. Hammond
To ask the Secretary of State for Trade and Industry if she will make a statement on the operation of the New Electricity Trading Arrangements.[10992]
162W

§ Mr. Wilson
Ofgem published on 31 August a review of NETA's performance over the first three months. Their key findings were thatWholesale electricity prices are 20–25 per cent. below prices that would have been produced under the Pool. Market liquidity has been established with a threefold increase in the volume of trades, and a doubling of the number of contracts struck compared to this time last year under the Pool. The National Grid Company is working well to keep the electricity system in balance. Its daily costs of balancing the system have halved, which will also benefit customers.
The impact of NETA on smaller generators continues to be a concern. Ofgem also published a report on the impact of NETA on smaller generators in the first two months of its operation. This report highlighted the areas where further action was needed to assist smaller generators. I have issued a consultation document aimed at addressing these concerns, and copies have been placed in both Libraries of the House.

§ Mr. Key
To ask the Secretary of State for Trade and Industry if she will make a statement on the impact of the new Electricity Trading Arrangements on the generation of electricity by wind power.[10118]

§ Ms Hewitt
[holding answer 30 October 2001]: The impact of NETA on smaller generators, including renewables such as wind power, was and continues to be of great concern. Ofgem published on 31 August 2001 a report on the impact of NETA on smaller generators, based on the first two months of NETA operation, as well as a report on NETA operation generally.
Ofgem's key findings on the initial impact of NETA on smaller generators, including wind generation, included:

(a) That the prices achieved by smaller generators are 17 per cent. lower than under the Pool. This is a somewhat smaller reduction than for generation prices overall. Ofgem reports, however, that wind plant have seen the largest drop in the price paid for their exports, 27 per cent.

(b) Smaller generators' output has fallen substantially. Ofgem suggests the lower export prices for electricity are one factor, but also speculates that higher costs (especially gas prices) may also have contributed. Exports for wind generation, however, are only down by 13 per cent.

(c) In its report Ofgem has singled out the position of wind generators within the renewables community as especially unpredictable. Other than wind power. the output of smaller generators does not appear to be significantly less predictable than for other generators.

The Government issued proposals specifically aimed at addressing the concerns of the smaller generators community, including wind generation. Copies have been placed in both Libraries of the House.
The Government remain committed to their target for 10 per cent. of electricity sales from licensed suppliers to come from renewables which are eligible for the Renewables Obligation by 2010, subject to the costs being acceptable to the consumer.