US power generator TXU has signed two framework agreements to promote the development of renewable energy projects in the UK.
One with Novera Energy Europe will underwrite the construction of 150MW of renewable projects over the next six years, while the second with Hainsford Energy should provide a further 100MW over the next 10 years. In both cases TXU is providing the small independent companies with long-term power purchase agreements.
These will enable them to raise project finance to build their schemes and protect them from the ‘balancing market risk’ under the New Electricity Trading Arrangements (Neta), which came into force in April 2001.
Because renewables generation is relatively unpredictable, small generators operating wind turbines or combined heat and power plants have been hugely disadvantaged by a system that places great emphasis on the accurate prediction of supply.
Under Neta there are heavy penalties for those who are forced to buy power through a balancing mechanism to make up any shortfall on their supply contracts.
Martin Stanley, TXU’s president for trading and production in Europe who chairs the company’s sustainability forum, said: ‘Our renewables energy strategy embraces a burgeoning independent UK industry, solving the largest obstacles it faces in securing finance and bringing output to the market under Neta.’
Last week the Cabinet Office Performance and Innovation Unit published its long-awaited energy review, setting out guidelines for energy policy for the next 50 years.
This recommends the UK should seek to generate 20 per cent of its electricity from renewable sources by 2020, and says urgent action is needed to break down the institutional barriers to investment in renewable and combined heat and power.
The report singles out Neta for criticism and recommends that, if changes cannot be made to the existing system, the government should consider new legislation to remove its adverse effects on the development of renewable power sources.
But while the PIU’s recommendations were broadly well received, the UK’s big energy consumers cautioned that such energy remained more expensive than traditional forms of electricity generation and said this could put UK industry at a competitive disadvantage unless remedied swiftly.
The Major Energy Users’ Council said that further research to reduce the cost energy from such sources was consequently needed urgently.
Andrew Bainbridge, director general of the MEUC, said: ‘We are concerned that environmental taxes in the past couple of years have added significantly to customers’ costs. There is nothing to be gained environmentally from UK industry becoming uncompetitive with processes and jobs going overseas.’