ABSTRACT
Since the privatisation of the electricity industry in 1989, there has been a resurgence of interest in small scale hydropower (<5MW) in the UK. Near-market renewable technologies, including small hydro, have been encouraged by the Non-Fossil Fuel Obligation (NFFO) mechanism, which requires the privatised electricity companies to secure a specified amount of electricity supply from renewable sources. Successful proposers receive a 15 year duration, fixed-price contract for electricity purchase from their renewable scheme. The mechanism is compétitive, and has resulted in a reduction in the maximum contracted selling price for small hydro generated electricity from 3.75Rs/kWh in 1990 to 2.42Rs/kWh in 1995 (2.08Rs/kWh in Scotland). This price convergence is set to continue with a further round of contracts offered in 1997. The maximum contracted price for small hydro in 1997 is expected to be around 2.0Rs/kWh. The main reasons for price convergence are better design, lower finance costs and improved procurement methods.
Between 1989 and 1995, 100 subsidised electricity purchase contracts were awarded under the NFFO and similar arrangements, to sites with a combined installed capacity of 73MW. Several of these sites were existing power stations, which required the subsidy to avoid closure. However, the development of new sites, and the refurbishment of abandoned sites has also been stimulated, and is now the main focus of the initiative.
The NFFO initiative has promoted growth in some sectors of the UK small hydro industry, particularly new project developers and consultants. Around 75 companies are directly involved in small hydro in the UK, including 13 turbine manufacturers, 12 professional developers and 50 consultants. In addition there are many manufacturers of ancillary equipment, such as generators, switchgear, control systems, sluice gates and pipes. Key development issues have emerged as finance, skills, abstraction licencing and environmental impact. Experienced developers, particularly those with access to equity finance, are recently beginning to dominate the competitive market. These developers, which include subsidiaries of the privatised water and electricity companies, and private ‘entrepreneurial’ companies, are now seeking to expand their activities overseas. Experienced partnerships, developed under the NFFO, can now offer a complete finance, skills and equipment supply packaged approach for rapidly developing markets, such as that in India.
