The U.K. NFFO and Ireland AER Competitive Bidding Systems

Until recently, the United Kingdom's (UK) principal form of support for renewable energy was delivered through a competitive bidding process known as the Non-Fossil Fuel Obligation (NFFO). Through this process, renewable generators were able to bid for above-market power purchase agreements (PPA) in five NFFO auctions. The UK's electric companies were required to purchase the output of projects awarded NFFO contracts. Instead of the government paying production incentives to renewable energy generators, however, the utility purchasers were reimbursed for any above-market costs that were incurred. A similar mechanism, called the Alternative Energy Requirement (AER), has been operating since 1995 in Ireland. Because these systems eliminate "power purchase agreement uncertainty," a major concern in the U.S., they are described in this case study.