HC Deb 06 February 1997 vol 289 cc694-6W
Mr. John Greenway

To ask the President of the Board of Trade what progress has been made in the competition for contracts to supply electricity generated by renewable sources of energy under the fourth renewables non-fossil fuel obligation order, NFFO4; and if he will make a statement. [15118]

Mr. Page

I have today laid before Parliament an order requiring the regional electricity companies in England and Wales to make arrangements to secure 843 MW of new electricity generating capacity from a range of renewable energy sources. This is the fourth and largest renewables order under the non-fossil fuel obligation arrangements and covers the period 1 May 1997 to 30 December 2016.

Responses by bidders to the tender invitation were very impressive. The industry has achieved an average price for these projects of 3.46p per kilowatt hour, almost one penny better than the 4.35p achieved in NFFO3. Real convergence with market prices is clearly now within reach and our strategy of stimulating a competitive renewables market is working well. This has allowed me to do more and set an order which is larger than I envisaged when announcing NFFO4 in November 1995.

I now expect the RECs to meet their obligations arising from this NFFO4 order by signing contracts, through their agent the Non-Fossil Purchasing Agency Ltd., for 195 projects, details of which are tabulated.

Summary of fourth renewables order (NFFO4)
Technology Contracted capacity for NFFO4 MW DNC Number of projects Lowest contracted price p/kWh Capacity weighted average price p/kWh Highest contracted price p/kWh
Landfill Gas 173.7 70 2.8 3.01 3.2
Waste-Fired Combined Heat and Power 115.3 10 2.79 3.23 3.4
Waste-Fired Fluidised Bed Combustion 126.0 6 2.66 2.75 2.8
Small Scale Hydro Electricity 13.3 31 3.8 4.25 4.4
Wind Energy larger than 0.768 MW DNC 330.4 48 3.11 3.53 3.8
Wind Energy 0.768 MW DNC or less 10.4 17 4.09 4.57 4.95
Anaerobic Digestion of Agricultural Wastes 6.6 6 5.1 5.17 5.2
Biomass Gasification of Pyrolysis 67.4 7 5.49 5.51 5.79
Total 843.1 195 — 3.46 —
Note:
DNC is declared net capacity, the maximum power available, and takes account the intermittent nature of wind energy.

Successful generators will need to obtain planning permission for their projects if they have not already done so. Award of a NFFO contract does not confer any special privilege in the planning approval process which must be carried out in the normal way. I expect generators to develop their projects with care and sensitivity and so ensure the long-term prosperity of their industry.

NFFO has a very high international reputation as a process that works well in stimulating the renewables market for the most promising renewables and encouraging manufacturing industry. Over 428 MW of capacity is already operational under NFFO1, NFFO2 and NFFO3.

Our aim is to work towards 1,500 MW of new renewables-based generation capacity by 2000. This objective requires steady convergence under successive orders between the price paid under the NFFO and the market price, which is being achieved through effective competition in the allocation of NFFO contracts.

The Government took this into account in determining the size of the bands. In particular, they took into account the cost and quality of proposals received, and the assessment of the implications for the policy objective of helping the different renewable technologies to enter the commercial electricity generating market.

By having separate bands, we have ensured that the technologies involved have the opportunity of contributing to the capacity required under the order, to the extent that is appropriate to each particular technology.

Policy will be reviewed prior to the fifth order, NFFO5, in 1998 and will take into account progress under NFFO3 and this larger order, NFFO4. Over the next few years, I expect increasing numbers of renewable projects to be developed and be able to generate in the liberalised electricity market without needing support under the NFFO arrangements.

1992–93 1993–94 1994–95 1995–96 1996–97
Hacking incidents (excluding minor instances of computer misuse) 0 2 1 0 0
Fraud 0 0 0 0 0
Theft (including theft of computer chips and components) 10 13 31 44 15

This will illustrate the success of our strategy to develop renewables-based technologies which bring with them environmental benefits from using sustainable energy sources; help to secure diversity of energy supplies; and develop an internationally competitive industry.

I have made the order after consultation with the RECs and the Director General of Electricity Supply. His advice has been deposited in the Library of the House and was published by the Office of Electricity Regulation on 31 January 1997.