Legislative background

The Non Fossil Fuel Obligation (NFFO) introduced by the conservative government in 1990 was designed to support renewable generation projects. This Obligation aimed to encourage the development of renewable energy projects by awarding a fixed price (linked to RPI) for electricity produced over 15-year contracts. Landfill gas was the most successful renewable technology under this support mechanism.

The labour government introduced a final round of NFFO (NFFO5) and then carried out a review of renewable energy policy. The new labour policy is based on a “supply obligation” which allows the market to decide which technologies to develop. In the words of Helen Liddell, the Energy Minister at the time of the launch of the policy, she wanted renewable energy industry to be “Lean and Mean as well as clean and green”.

The Renewables Obligation places a target of approximately 10% of UK electricity to be met by renewables by 2010 and 15% by 2015. Landfill gas is classified as a qualifying technology within this new framework. This obligation coupled with a complete overhaul of the way electricity is bought and sold (The New Electricity Trading Arrangements – NETA) and the introduction of the Climate Change Levy (a tax on the business use of energy introduced in 2001) means that the whole process of managing projects is extremely complex. The formation of SITA Power was designed to ensure that people with relevant expertise and knowledge were involved in the formulation and development of projects within the group.

“Following the wholesale changes to the electricity market in the UK it is essential that we maintain a detailed knowledge of the various financial instruments introduced. It is this knowledge which will ensure that we maximise the value of generation within the group”. Tim, General Manager, SITA Power