Select Committee on Environmental Audit Memoranda


APPENDIX 26

Memorandum from Centrica plc

1.  INTRODUCTION

  1.1  Centrica plc trades as British Gas in the British Energy Market. Although the company has evolved towards being a supplier of essential services in and around the customer's home, the energy supply business remains central to the company's operations. Centrica is the largest new entrant to the electricity market and is subsequently keen to contribute to the debate on the Government's targets for electricity generation from renewable sources.

  1.2  Centrica is therefore pleased to offer this submission to the Committee. Our evidence concentrates on tradeable certificates, the obligation targets, NETA and distribution and transmission systems.

2.  TRADEABLE CERTIFICATES

  2.1  Centrica believes that if the proposed Renewable Obligation is to function properly there will be a need for a liquid market in which to trade Green Certificates (Renewable Obligations Certificates/ROCs). In order to help such a market develop we believe it would be useful to have a set of standard terms for trading ROCs. In the electricity market the GTMA (Grid Trade Master Agreement) has been accepted as the standard set of terms under which electricity trades take place. We have drafted a ROCTMA (like a GTMA for ROCs) which could serve a similar purpose for a ROC market. This draft is attached for the Environmental Audit Committee's consideration.[55]

  2.2  We believe that ROCs should be attributed to all renewable generation regardless of use (on-site/non grid connected etc).

  2.3  We also support the full tradability of CCL Exemption Certificates, separate to the underlying energy to maximise their value.

3.  THE OBLIGATION TARGETS

  3.1  We are unsure of the reasoning behind the shape of the proposed obligation target levels whilst the initial ramping up of the annual rate of increase is understandable, the rate of increase then levels out in the latter years of the obligation. It is unclear to us the rationale for this levelling out. We assume that the need for increased renewable generation will extend beyond the obligation period, subject to the costs to the customer being acceptable, and are surprised that the rate of increase is not constant across the final five years of the ten year period.

  3.2  Centrica has looked at some of the quantitative research findings on the future potential for renewable technologies. The data we have seen to date on potential volumes and technology costs gives us some concern as to whether the Government's targets are achievable - particularly in the short term (say 5 years).

  3.3  Centrica continues to have concerns over whether measures are in place to ensure that the necessary planning consents, which are needed for renewable generation to develop, will be forthcoming for the volume of renewable development required (these concerns relate to both onshore planning consents and the offshore Crown Estates process).

  3.4  The recent reports of the Embedded Generation Working Group suggest that there will be no changes to the distribution pricing methodology, which could encourage embedded generation until April 2005 - this will be too late for much of the obligation period.

4.  NETA

  4.1  Centrica believes that under NETA, power of an unpredictable nature will attract a low value—this is likely to reduce the value of the more variable forms of renewable generation.

  4.2  However, it is our view that NETA should not be altered to "assist" small or non-firm generators. Instead they should be supported by explicit measures, such as capital grants, Distribution Use of System Charging changes and ROCs.

5.  DISTRIBUTION AND TRANSMISSION

  5.1  Centrica believes that any review of Distribution Charging should recognise that there are different considerations for technologies where the intermittent nature is concurrent (eg wind) or non-concurrent (eg landfill). Technologies that are characterised by concurrent intermittency could have a detrimental effect on the Distribution System. Any revision to Distribution Charging should take account of these disadvantages, as well as any advantages that embedded generation may bring.

  5.2  It is our opinion that the current state and design of the Distribution and Transmission system should be assessed in relation to the potential location of renewable generation. In particular, it is important to ensure that the target volumes of renewable generation can be accommodated by the current infrastructure and that their power is able to be transmitted.

January 2001



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