NETA dishes the dirt on wind energy

The weakest link?

Country Guardian and the local windfarm objector groups have hammered away at the serious problems created by the intermittency and unreliability of wind energy, and particularly onshore wind. In April 2001 a headline in the Financial Times sent a chill through the wind industry-

"Electricity reforms hit green energy schemes"

The report went on to describe a survey done of the first week of the New Electricity Trading Arrangements. "Analysis carried out by University of Manchester Institute of Science and Technology on energy prices in the first week of Neta shows that wind turbines selling electricity into the transmission grid would have made a loss"

" The design of Neta is inherently very bad news for renewable generation. The most profitable way of operating a windfarm so far has been to turn it off", said Professor Goran Stabac of UMIST"

The background to Neta (pronounced 'neater') is a fundamental switch away from the rigid Pool system to a 'market system' in which electricity 'suppliers', the old electricity boards, buy electricity from generators, e.g. National Power (now Innogy) using a screen-based system like that used in commodity trading. They have a range of options ranging from long-term contracts for sources such as nuclear or hydro, to small purchases of energy from intermittent sources as and when it is offered. The problem for wind, and for many other renewable sources, is that the small generators cannot predict accurately what will be available three and a half hours in advance, the basic requirement of the system. If they offer to supply and the wind drops the supplier has to buy in the open 'spot' market and charges the generator for the inevitable high cost of spot purchases. The Neta process itself suffered severe birth pangs and has been very expensive for all concerned. Estimates of the cost of the computer systems alone range from £8 million for each supplier to £20 million for the generators. There is no way back to the old system. The FT reported that the DTI had received a number of suggestions from small generators and buyers about how the arrangements could be improved and the DTI was quoted as stating "We have asked the regulator to undertake a review of the initial impact of Neta on small generators based on the first two months of operation. It is too early to say what action we will be taking as a result."

Windpower Monthly devoted a long technical article to this subject, with special reference to the UK experience. The gist of it was that there is a problem for wind power unless the generators can pool the electricity to try to smooth out the peaks and troughs. However, it is hard to see how this can be done without a great deal of organisation and more complex computer systems. The result of the DTI referral came through at the end of August 2001. In a report in the The Times the energy regulator Callum McCarthy "gave the newly revamped market for electricity a clean bill of health..it had reduced volatility and delivered cheaper electricity prices...and cut the cost of running the National Grid by more than half." Ofgem has surveyed 500 small generators and found no evidence that smaller power companies would go to the wall as a result of Neta. "In September Brian Wilson announced the setting up of the Embedded Generation Co-ordination Group, to consider suggestions which might help small generators -wind, CHP, small hydro - which typically are "embedded" in local rather than national distribution networks. The Group will address how small embedded generators can contribute to overall power needs, how they are charged for using the network and how network operators could make information about connection more transparent. The Group is chaired jointly by the DTI and Ofgem, which suggest a degree of tension between them, as Ofgem is effectively part of DTI.In August more quantified data was reported by in a survey carried out by the Confederation of Renewable Energy Associations (CREA). It reported that the smallest wind generators feel overwhelmed by the complexity of the current trading situation. One small wind generator had its contract terminated by its purchaser at the start of Neta, while two are considering removing their wind turbines as they are not making any profit. CREA hope that the advent of the Climate Change Levy and the Renewables Obligation in January 2002 will counterbalance to damage done by Neta. Over the first two months of Neta sales of wind-generated output fell by 13%, and on top of this the prices paid for wind-generated energy fell by 27% (as against 17% for all forms of small generation). This resulted in an overall drop of 34.8% in overall income for wind. It also appeared that the the hoped-for  co-operation leading to consolidation of bids had very little impact so far.Finally, the dreaded Callum McCarthy, head of Ofgem, made the specific point that Neta had driven down electricity prices to the point where, "if the government wanted to promote less predictable and reliable forms of electricity for wider environmental reasons" it must put in specific subsidies to do this, and these subsidies must be transparent. The suppliers (who are the purchasers of the electricity) will need to know the buy-out price which the Renewables Obligation will require them to pay for this form of energy.  So no fudging, a daunting prospect for the politicians!