ON THE RECORD
Reflecting on the NFFO
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An early NFFO success: poultry litter power station, Eye in Suffolk
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Perhaps the primary development in UK renewables over he lifetime of NEW REVIEW has been the Non-Fossil Fuel Obligation (NFFO) and its equivalents in Scotland and Northern Ireland. Five
Orders under the NFFO were made in England and Wales by Government between 1990 and 1998. The Non-Fossil Purchasing Agency (NFPA) has been responsible for managing he contracts
let under these Orders. NEW REVIEW spoke to Andrew Wood, the Agency's Managing Director, about the NFPA, the NFFO and their contribution to UK renewables over the past decade.
NEW REVIEW: To what extent have the NFFO, the NFFO process and the NFPA contributed to the development of a mature (or maturing) renewables industry in the UK?
Andrew Wood: Very substantially. In total, some 335 projects have so far come to fruition under NFFO contracts.
Several generation/development companies have been able to build substantial green businesses by exploiting the bankability of the long-term NFFO contracts.
NR: In what sectors or technologies has the NFFO had the most impact? What were the main strengths of the NFFO process?
AW: In pure capacity terms, the answer would have to be wind and landfill gas. A total of 59 wind schemes,
amounting to some 122MW, and 180 landfill projects, representing 378MW, have so far been commissioned under
the NFFO. A key strength of the process has been the competitive prices it engendered which has helped to produce a dynamic renewables industry.
NR:What were the main lessons learned, or adjustments that needed to be made, as the NFFO developed?
AW: The most obvious lesson learned was that, however carefully the projects were examined at the time the
relevant Orders were made, it was not possible for every scheme to be built precisely as intended, and suitable amendments to schemes had to be made to reflect commercial or technical realities.
NR:With the benefit of hindsight, should anything have been done differently?
AW: It was probably inappropriate for the contracts to be so closely tied to a specific site. Many developers have
had serious problems with their intended site, frequently in respect of planning. Fortunately, it now seems probable
that this site inflexibility will be relaxed somewhat as a result of a Statutory Instrument currently being considered by Government.
NR: How has the NFPA perceived its own role? How have its outlook and the requirements placed on it changed?
AW: To some extent at least, the NFPA was perceived in the early days as having something of a “policing” role,
trying to ensure that the arrangements were not exploited unfairly. I would like to think that this evolved more into a
role of trying to help developers where possible by suggesting solutions to difficulties and problems. Clearly, with the
development of the Auction arrangements and NETA, a completely new set of demands has been placed on us,
with, in addition to managing the power purchase arrangements, a responsibility for selling and marketing the output
from our current portfolio of over 200 projects being required. The relatively small team at NFPA has, in my
opinion, done a very good job in getting these completely new arrangements up and running successfully against the background of a constantly developing and changing electricity market.
NR: How does the NFPA regard the new Renewables Obligation (RO) which will succeed the NFFO?
AW: Clearly, we hope it will succeed. There must, perhaps, remain a question as to whether the RO’s employment
of a flat rate for all renewables technologies, regardless of the degree of commercial maturity, represents the most
cost-effective use of funds - and I would be less than frank if I did not say that we are a little disappointed not to be
directly involved with new schemes which will be developed under the RO. However, the success of the NFFO
Auctions will remain important in ensuring liquidity in the Renewables Obligation Certificate market. This liquidity will
be necessary to maintain the stability and predictability in prices that will be required if developers under the RO are to be able to readily finance schemes in the future.
NR: How will people look back on the NFFO in 20 or 30 years time?
AW: Many, I hope, will look back fondly at the ease with which the contracts enabled project finance to be
secured. Perversely, perhaps, if the RO is highly successful, the NFFO, which will in many ways have laid the
foundations on which that success is built, may be viewed less well than may be the case if the RO hits choppy waters.
NR: Where do you see the NFPA going from here?
AW: We have a current portfolio of over 200 contracts and there are in excess of 300 further projects still to
commission. We need to continue our efforts to obtain the best value from these, but we will also look at other opportunities to provide services to the renewables market where we can.
