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Dept of Trade and Industry

Answer

John Thurso: To ask the Secretary of State for Trade and Industry what measures she has taken to help intermittent suppliers adversely affected by New Electricity Trading Arrangements. [126720] Mr. Timms: There have been a number of refinements to NETA since its implementation in March 2001 that should have helped intermittent generators. These include: Shorter gate closure, implemented in July 2002, has made it easier for all participants to manage their risks, particularly intermittent generators who should be better able to predict their output better one hour ahead of real time. Recent changes to the Balancing and Settlement Code and National Grid's charging methodology were implemented to help smaller generators (many of which are intermittent) by unbundling so-called embedded benefits further. Embedded benefits are those benefits which accrue through not having to use the high voltage electricity transmission grid. These changes allow smaller generators to be paid these benefits directly from National Grid, rather than have to negotiate with electricity suppliers during contract rounds, which enables smaller generators to receive more of the embedded benefits that they create. The Government have always been clear that they support Consolidation and changes which make it easier for larger suppliers to market power on behalf of smaller generators. This gives smaller generators an outlet for their supply, and larger generators have a wider portfolio of power. The way in which energy imbalance prices in the Balancing mechanism are calculated was changed in March 2003 to make them more cost-reflective. This revised the definitions of the System Buy Price and the System Sell Price and has changed the way that National Grid calculates them. Early indications are that it has significantly reduced the spread of imbalance prices, which should be of particular benefit to intermittent generators. The spread of imbalance prices, which was around 20/MWh at the time of the introduction of NETA, was reduced to 0.6/MWh during the week commencing 7 July 2003. Outside of NETA, there have also been further changes that have helped smaller generators. Last November the DTI and Ofgem launched a webportal, on the main Ofgem website, which contains comprehensive guidance for smaller generators to help them understand the market. The recent Energy White Paper further committed to making the administration procedures for the Balancing and Settlement Code more accessible to smaller generators to help them participate more effectively in the market. In the Budget 2002 the Chancellor also announced the completion of the exemption of Good Quality CHP from the climate change levy, thus ensuring that Good Quality CHP used on site, sold direct and sold indirect will be exempt from the levy. The decision recognises the environmental benefits of all Good Quality CHP and has given the CHP sector, which has been hard hit recently by falling electricity prices and rising gas prices, a much needed boost. Finally, the Renewables Obligation was introduced in April 2002, which requires licensed suppliers to buy a specified proportion of their electricity from accredited renewables sources every year. Intermittent generators typically fall into this category and many of them have benefited considerably.

Secondary information

Type

Written question

Reference

126720; 409 c511-2W

Session

2002-03

Subjects

Fees and charges Electricity generation Electricity Markets

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk