(70) Therefore, the risk of sulphuric acid dew point attack ... - DTI Home

consents policy had the effect of concentrating attention on the development
of CHP projects.
6.4.2.2 Natural Gas Prices
Most CHP plant is fuelled with natural gas. The interconnection of the UK gas
grid with that of continental Europe via the Bacton-Zeebrugge pipeline was
accomplished in October 1998. This has exposed the UK to the higher prices
of the continental European market and UK natural gas prices have
consequently risen from a low of under 14p/therm in 1999 to 19p/therm in
2001 [77] .
6.4.2.3 New Electricity Trading Arrangements
The New Electricity Trading Arrangements (NETA) were brought into force
in March 2001. NETA introduced new regulations governing the deregulated
electricity market in the UK. Previously the pool price at any one time was
paid to all generators supplying power at that time and the price was set by the
most expensive generator. Under NETA, most wholesale electricity sales
between generators and retailers are now concluded well in advance with the
timing, volume and price of supply fixed. A balancing mechanism provides a
means of meeting short term demand fluctuations. Fierce competition since
the liberalisation of the market has driven down the prices at which contracts
have been concluded. Since 1998, when NETA was first proposed, electricity
wholesale prices have fallen by 40%. Between April 2001 and February 2002
baseload prices have fallen by 20% and peak prices by 27% [78] .
What is more, CHP schemes are unlikely to get the best prices. CHP schemes
are generally small compared to utility scale plant so have little market
influence. Penalty payments are levied if a generator fails to meet its
scheduled supply profile. Many grid connected CHP schemes tend to run to
meet the heat or steam demands of its customer, rather than an electricity
supply profile, and the electrical output is therefore not entirely predictable.
The CHP scheme is exposed to a potential mismatch between the heat and
electrical demand profiles that it is trying to meet. This results either in NETA
penalties or running at lower efficiency than the design point.
6.4.3 Other Barriers for UK Firms
The grid has evolved to distribute electricity from a small number of large
generators. A substantial amount of power is wasted in the form of
transmission losses. In 1999 it is estimated that transmission and distribution
losses accounted for 1336 TWh, equivalent to 11.6% of the World’s final
electricity demand [79] . CHP plants are generally connected to local grid
networks and the separation between generator and consumer is smaller,
resulting in lower transmission and distribution losses. Decentralised or
embedded generation can also have benefits in strengthening the local grid and
improving power quality. These benefits of embedded generation are currently
not fully reflected in the sale price of electricity from CHP schemes. However
the connection of a large number of smaller generators may also cause
difficulties for the grid system relating to fault levels, islanding and power
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