Non-Fossil Fuel Obligation
Encyclopedia
The Non-Fossil Fuel Obligation (NFFO) refers to a collection of orders
requiring the electricity Distribution Network Operator
s in England
and Wales
to purchase electricity from the nuclear power
and renewable energy
sectors. Similar mechanisms operate in Scotland
(the Scottish Renewable Orders under the Scottish Renewables Obligation) and Northern Ireland
(the Northern Ireland Non-Fossil Fuel Obligation).
Five orders were made under the NFFO before the UK government replaced it with the Renewables Obligation
, the first order or 'tranche' was on October 1 1990 with an average price of 7.51 pence per kWh being paid to renewable energy generators, the fifth and last was in September 1998 at an average of 2.71 pence per kWh http://www.nfpa.co.uk/index.cfm?pid=33. Although the Renewables Obligation
is now the Government’s main mechanism for expanding the renewables sector, the last of the existing orders will continue in effect until it expires in 2018.http://www.ofgem.gov.uk/temp/ofgem/cache/cmsattach/7400_12804.pdf Contracts resulting from the first two tranches however terminated in 1998, allowing generators from these rounds to now sell electricity under the new mechanism.
in the UK was privatised
. The original intention was to provide financial support to the UK nuclear power generators
, which continued to be state owned. The proposals were enlarged in scope before the Obligation was brought into operation in 1990 to include the renewable energy sector. Contracts from the last three rounds remain in place with the generators receiving the agreed amount from the NFPA and the NFPA effectively taking ownership of the Renewables Obligation Certificate (ROC) which the generator is entitled to.
, a levy placed on all electricity consumption in the UK. This was collected by Ofgem, which paid it to the Non-Fossil Purchasing Agencyhttp://www.nfpa.co.uk/, a body created in 1990 by the Public Electricity Supplier
s to purchase on the supplier's behalf. The purchasing agency is based in Newcastle-Upon-Tyne.
Since the introduction in 2001 of the New Electricity Trading Arrangements
, electricity suppliers bid for the electricity and ROCs in competitive auctions held by the Non-Fossil Purchasing Agency, with any shortfall in price being funded by the Levy. As a result of these arrangements, the Non-Fossil Fuel Obligation has been generating a trading surplus, expected to have reached £500m by 2008. The Government have been criticised for siphoning off funds from this surplus to contribute to the exchequer, instead of using it to support renewable energy in other ways http://politics.guardian.co.uk/comment/story/0,,1840311,00.html.
Statutory Instrument
A Statutory Instrument is the principal form in which delegated or secondary legislation is made in Great Britain.Statutory Instruments are governed by the Statutory Instruments Act 1946. They replaced Statutory Rules and Orders, made under the Rules Publication Act 1893, in 1948.Most delegated...
requiring the electricity Distribution Network Operator
Distribution Network Operator
Distribution network operators are companies licensed to distribute electricity in Great Britain by the Office of Gas and Electricity Markets....
s in England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
and Wales
Wales
Wales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...
to purchase electricity from the nuclear power
Nuclear power
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...
and renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
sectors. Similar mechanisms operate in Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
(the Scottish Renewable Orders under the Scottish Renewables Obligation) and Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
(the Northern Ireland Non-Fossil Fuel Obligation).
Five orders were made under the NFFO before the UK government replaced it with the Renewables Obligation
Renewables Obligation
The Renewables Obligation is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form in Scotland in April 2002 and in Northern Ireland in April 2005, replacing the Non-Fossil Fuel...
, the first order or 'tranche' was on October 1 1990 with an average price of 7.51 pence per kWh being paid to renewable energy generators, the fifth and last was in September 1998 at an average of 2.71 pence per kWh http://www.nfpa.co.uk/index.cfm?pid=33. Although the Renewables Obligation
Renewables Obligation
The Renewables Obligation is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form in Scotland in April 2002 and in Northern Ireland in April 2005, replacing the Non-Fossil Fuel...
is now the Government’s main mechanism for expanding the renewables sector, the last of the existing orders will continue in effect until it expires in 2018.http://www.ofgem.gov.uk/temp/ofgem/cache/cmsattach/7400_12804.pdf Contracts resulting from the first two tranches however terminated in 1998, allowing generators from these rounds to now sell electricity under the new mechanism.
Background
The Non-Fossil Fuel Obligation was put in place under the powers of the Electricity Act 1989, under which electricity generationElectricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...
in the UK was privatised
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
. The original intention was to provide financial support to the UK nuclear power generators
Nuclear power in the United Kingdom
Nuclear power currently generates around a sixth of the United Kingdom's electricity. As of 2011, the United Kingdom operates 19 nuclear reactors at nine locations...
, which continued to be state owned. The proposals were enlarged in scope before the Obligation was brought into operation in 1990 to include the renewable energy sector. Contracts from the last three rounds remain in place with the generators receiving the agreed amount from the NFPA and the NFPA effectively taking ownership of the Renewables Obligation Certificate (ROC) which the generator is entitled to.
Funding
Funding for the NFFO was originally generated by the Fossil Fuel LevyFossil Fuel Levy
The Fossil Fuel Levy is a levy paid by suppliers of electricity from non-renewable energy sources in the United Kingdom. The costs are shared by the suppliers and consumers, as a proportion of the cost is passed on to consumers in the cost of the electricity supplied...
, a levy placed on all electricity consumption in the UK. This was collected by Ofgem, which paid it to the Non-Fossil Purchasing Agencyhttp://www.nfpa.co.uk/, a body created in 1990 by the Public Electricity Supplier
Public Electricity Supplier
Public electricity suppliers were the fourteen companies created when the electricity market in the United Kingdom was privatised. In England and Wales the Central Electricity Generating Board was responsible for the generation and transmission of electricity, with the 12 area electricity boards ,...
s to purchase on the supplier's behalf. The purchasing agency is based in Newcastle-Upon-Tyne.
Since the introduction in 2001 of the New Electricity Trading Arrangements
New Electricity Trading Arrangements
New Electricity Trading Arrangements is the name of the system under which electricity is traded in the United Kingdom's electricity market .-Overview:The New Electricity Trading Arrangements came into force on 27th March 2001...
, electricity suppliers bid for the electricity and ROCs in competitive auctions held by the Non-Fossil Purchasing Agency, with any shortfall in price being funded by the Levy. As a result of these arrangements, the Non-Fossil Fuel Obligation has been generating a trading surplus, expected to have reached £500m by 2008. The Government have been criticised for siphoning off funds from this surplus to contribute to the exchequer, instead of using it to support renewable energy in other ways http://politics.guardian.co.uk/comment/story/0,,1840311,00.html.
Only Renewables
In the past nuclear power was by far the greatest beneficiary of this system, and the associated fossil fuel levy was designed to support the nuclear power industry. The new emphasis is on promoting renewables, and nuclear power is no longer eligible.See also
- Climate Change LevyClimate Change LevyThe Climate Change Levy is a tax on energy delivered to non-domestic users in the United Kingdom. Its aim is to provide an incentive to increase energy efficiency and to reduce carbon emissions, however there have been ongoing calls to replace it with a proper carbon tax.-Scope and...
- Renewables ObligationRenewables ObligationThe Renewables Obligation is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form in Scotland in April 2002 and in Northern Ireland in April 2005, replacing the Non-Fossil Fuel...
- Renewables Obligation Certificates
- Energy policy of the United KingdomEnergy policy of the United KingdomThe current energy policy of the United Kingdom is set out in the Energy White Paper of May 2007 and Low Carbon Transition Plan of July 2009, building on previous work including the 2003 Energy White Paper and the Energy Review Report in 2006...
- Energy use and conservation in the United KingdomEnergy use and conservation in the United KingdomEnergy use in the United Kingdom stood at 3,894.6 kilogrammes of oil equivalent per capita in 2005 compared to a world average of 1,778.0. In 2008, total energy consumed was 9.85 exajoules - around 2% of the estimated 474 EJ worldwide total...