ADDITIONAL RESPONSES TO QUESTIONS ASKED DURING THE ORAL EVIDENCE SESSION

Q 431:

  Note: In the first 10 years of commercial deployment of wind turbines (from 1983-93) some 500MW of turbines were installed in Denmark (equivalent to just 0.3 per cent of UK demand). This was achieved via production based support measures (eg tariffs of 12-15p/kWh) which allowed early commercial investors in wind farm projects to make acceptable returns. This market deployment in turn allowed costs of generation from wind to fall substantially—by some 80 per cent)—which has resulted in (a) the Danish dominating the market for commercial wind turbines today and (b) wind offering the potential to deliver a much higher proportion of our electricity generation needs at economic cost. We believe that there are many parallels with the development of marine renewable energy technologies and that a similar market enablement mechanism would leverage in private investment into wave and tidal generation projects at least cost and risk to the taxpayer whilst having the possibility of delivering substantial returns to UK plc in the future in terms of jobs, exports and global CO2 emissions reduction potential.

Q 455:

  A pessimistic view on the long term power purchase agreements (ie at PPAs being of lower value), would result from as optimistic view of future renewables capacity being achieved.

  If an electricity supplier offering a long term PPA believes that there is a "risk" that the Renewables Obligation target for a particular year is likely to be met there will be a surplus of ROCs over demand and the value of ROCs will crash. If this is the case, a much lower value ROC PPA will be offered.

  Inevitably the longer term of the PA required, the greater the uncertainty and potential risk of whether the RO target will be met and the worse the potential value of the PPA.

  Hence for development and construction of projects to proceed backed by long term (10-15 year) PPAs it is vital that the RO target is set far enough in the future and at a high enough level in order that the risk of ROC values crashing to zero is perceived to be very low.

March 2004