ENV-2E02 Energy Resources
2004 - 2005
5. Non-Fossil Fuel Obligation:
Renewable Obligation
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.
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
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
Technology NFFO-2 Actual Available price per
Group Requirement Contracts November 2000 kWh
(MW)` (MW) (MW)
WASTE
Municipal/ 261.48 271.48 31.5 6.55
industrial
Other Waste 28.15 30.15 12.5 5.9
Landfill 48.0 48.45 46.4 5.7
Sewage 26.86 26.86 19.1 5.9
Hydro 10.36 10.86 10.4 6.00
Wind 82.43 84.43 53.8 11.00
Total 457.28 472.23 173.7
The payments under NFFO-2 expired on 31/12/1998
5.3 Non-Fossil Fuel Obligation: NFFO-3
TECHNOLOGY Requirement Available
DNC (MW) (Nov: 2000)
(MW)
Energy Crops Gasification 19.056 46.5
Energy Crops Residues 103.805
Hydro 14.480 11.7
Landfill 82.071 82.1
Municipal and Industrial 241.765 77.4
Waste
Wind - large 146.916 44.7
Wind - small 19.707
Total all schemes 627.800 262.5
Note: substantial shortfall again
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.
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
NFFO Projects in Operation on 31st December 2003
Number of Capacity
ORDER Technology
Projects (MW)
Hydro 9 7.63
Landfill gas 17 29.32
NFFO - 1 Municipal and industrial waste 4 40.63
(1990) Other 2 25.38
Sewage gas 6 5.98
Wind 2 5.81
Total 40 114.74
Hydro 2 2.78
Landfill gas 26 46.39
NFFO - 2 Municipal and industrial waste 2 31.50
(1991) Other - -
Sewage gas 17 18.39
Wind 21 52.20
Total 68 151.26
NFFO Projects in Operation on 31st December 2003
Number of Capacity
ORDER Technology
Projects (MW)
Energy crops and agricultural
2 69.50
and forestry
Hydro 8 11.74
NFFO - 3
Landfill gas 42 82.07
(1995)
Municipal and industrial waste 7 89.12
Wind - large 10 41.02
Wind - small 13 11.86
Total 82 305.31
BUT: 142 projects with a total of 626.90MW were contracted
Actual installation of Wind is only 28% of contracted figure in
1996.
NFFO Projects in Operation on 31st December 2003
Number of Capacity
ORDER Technology
Projects (MW)
Hydro 9 2.49
Landfill gas 57 146.00
Municipal and industrial waste -
NFFO - 4 CHP 4 33.48
(1997) Wind - large 4 12.97
Wind - small 5 3.27
Anaerobic digestion of
1 1.43
agricultural waste
Total 80 199.64
Hydro 3 0.64
NFFO - 5
(1998) Landfill gas 67 137.26
Wind - small 6 4.85
Total 76 142.75
NFFO
England and Wales 346 913.70
Total
NFFO Projects in Operation on 31st December 2003
Number of Capacity
ORDER Technology
Projects (MW)
Biomass 1 9.80
SRO - 1 Hydro 9 8.81
(1994) Waste to Energy 2 3.78
Wind 7 25.13
Total 19 47.52
Biomass
SRO - 2 Hydro 2 1.46
(1997) Waste to Energy 6 17.65
Wind 5 31.29
Total 13 50.40
Waste to Energy 7 16.04
SRO - 3 Wave 1 0.20
(1999) Wind - large 1 8.29
Wind - small 5 4.28
Total 14 28.81
SRO Total 46 126.73
NFFO Projects in Operation on 31st December 2003
Number of Capacity
ORDER Technology
Projects (MW)
NI Hydro 8 2.33
NFFO - 1 Sewage gas
(1994) Wind 6 12.66
Total 14 14.99
Biogas
Biomass 2 0.30
NI
Hydro 1 0.08
NFFO - 2
Landfill gas
(1996)
Municipal and industrial waste
Wind 2 2.57
Total 5 2.95
NI NFFO
19 17.94
Total
NFFO Projects in Operation on 31st December 2003
ORDER Number of Projects DNC (MW)
NFFO - 1 40 114.74
NFFO - 2 68 151.26
NFFO - 3 82 305.31
NFFO - 4 80 199.64
NFFO - 5 75 142.75
TOTAL NFFO 346 913.7
SRO - 1 19 47.52
SRO - 2 13 50.4
SRO -3 14 28.81
TOTAL SRO 46 126.73
NI NFFO -1 14 14.99
NI NFFO -2 5 2.95
TOTAL NI NFFO 19 17.94
TOTAL ALL ORDERS 411 1058.37
Electricity Generation by Renewables 1990 - 2003
12,000
solar
wind/wave Solar 3 GWh
10,000 other biofuels
Waste
Sewage
8,000 landfill
hydro
GWh
6,000
4,000
2,000
-
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
1990
Electricity Generation by Renewables 1990 - 2003
400 4.0%
350 3.5%
Eletciricty Generated (TWh)
% Renewable Generation
300 3.0%
250 2.5%
200 2.0%
150 1.5%
100 1.0%
Electricity Generated
50 0.5%
% Renewables
0 0.0%
1990
1991
1992
1994
1995
1998
1999
2000
2001
2002
2003
1993
1996
1997
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.
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
15.7 Renewables Obligation
Needed for Renewables Climatic Capital
Source 10% Obligation Change Levy Grants
Target Exemption Available
Landfill Gas
Sewage Gas
Energy from Waste
Large Hydro > 10 MW
Small hydro
On shore Wind
Offshore Wind
Agricultural and
Forestry Residue
Energy Crops
Wave Power
Photovoltaics
5.9 Renewable Obligation Certificates -Operation
Notifies Regulator how The Regulator Notifies OFGEM
much generated.
of compliance
OFGEM -i.e. ROCs or
pays FINE
ROC’s issued FINES recycled
in proportion to
ROCs held
Renewable
SUPPLIERS
Generator Sells Electricity with or
without ROCs
Trader and Buys ROCs from Trader
Sells ROCs to Trader
Brokers
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.
5.9 Renewable Obligation Certificates -Operation
Auction Prices by Non Fossil Purchasing Agency
53
52 Buy out Prices
51
April 2002
50
49 3p per kWh
£ per MWh
48
April 2003
47
46 3.059p per kWh
45
April 2004
44
43 3.129p per kWh
42
Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05
This are prices paid for ROC’s generated under NFFO-3, 4 ,and
5 which by themselves do not qualify for ROC’s.
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
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.
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
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
15.13 Renewables Obligation: Amendment
• Threshold for ROCs
– ZICER could not qualify as output in November > 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 < 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 [Link]/energy/renewables