Renew On Line (UK) 49

5. Government pushes ahead with renewables and carbon trading

Renewables PR push

A £200,000 DTI funded campaign called ‘It’s Only Natural’ will seek to inform planners, investors and the wider community of the potential and benefits of renewable energy. The campaign will target planners and investors through workshops, a conference, media initiatives and a website.  The campaign will focus on the SW of England at first. Planners in that region will get additional support and information on renewable energy. It will also target the financial community by highlighting the investment potential of the renewable sector.

“The extension of the RO to 2015 has given the industry the confidence it needs to secure investment in new projects”, Energy Minister Stephen Timms said. “Now this campaign will reinforce that message to investors and also equip planners with the tools they need to determine planning applications.”

RO amended 

The government has amended the Renewables Obligation for  England and Wales. The new version, which came into force on April 1, makes it easier for small generators and biomass projects to get involved. It provides for the issue of Renewables Obligation Certificates (ROCs) to the operators of generating stations with a capacity of less than 50 kW by enabling ROCs to be issued on the basis of annual rather than monthly output.  It also stipulates a timetable to govern the percentage of energy content that must be derived from energy crops in biomass co-firing facilities, and determines the eligibility for ROCs of generating stations situated at locations subject to a non-fossil fuel obligation order.  The measures are designed to encourage greater use of biomass-powered generators by giving farmers more time to plant and harvest energy crops. In addition it should help small domestic level solar and wind generators. Previously, ROCs were only given if the monthly generation was at least 0.5 MWh, but the changes will allow these smaller generators to receive certificates based on their yearly output.

*  The Government will start a full review of the Renewables Obligation in 2005 ‘after the system has had time to develop and adjust to the impact of the European Emission Trading scheme’, which begins in Jan.

Carbon rules set

In January the Government published a consultation draft National Allocation Plan setting out how greenhouse gas emission allowances will be allocated to the operators of UK installations for the first phase of the EU Emissions Trading Scheme (ETS), which, all being well, will run from 2005 to 2007 (see box below right). 

Under the Kyoto agreement, the EU is formally committed to cut its greenhouse gas emissions by 8% in the commitment period 2008-2012, and the UK  is required to make a cut of 12.5% by then.  But it has also elected to try to reduce carbon dioxide emissions by 20% by 2020.  The Government says that it is ‘firmly committed to its national goal of moving towards a 20% reduction in emissions of carbon dioxide by 2010.’ However, the government’s initial allocation of allowances for the first phase of the proposed scheme is only consistent with an overall reduction in UK carbon dioxide emissions of 16.3%.  But it says the overall level of allowances to be allocated in the UK in phase 2 of the Scheme (which runs from 2008-12) will be strengthened ‘to be consistent with the trading sector’s contribution to achieving the 20% goal’.

This compromise may not entirely deflect the concerns of those who feared that the UK unilateral 20% target was being abandoned. Friends of the Earth urged the government to go ahead with the full 20% reduction from the start of the  scheme in 2005.  But they nevertheless welcomed the scheme, as far as it went. FoE’s Bryony Worthington praised ministers for setting a positive example for the EU. “This is the most significant piece of climate  legislation to have emerged since Kyoto, anywhere in the world.” 

On the other side of the debate, some industrial voices were raised in horror at the scheme.  They warned that they could increase wholesale electricity prices by between 40% and 80% by the end of the decade. The Energy Intensive Users Group told the Independent (20/1/04) “These proposals are counter-productive- they will simply drive industry offshore and raise global emissions. The UK is not in the lead- we are isolated”. The CBI was more measured but urged ministers to be cautious, saying they should stick to the original Kyoto target of 12.5%; otherwise Britain’s competitiveness and its manufacturing base would be damaged.

But experts at Climate Change Capital, a specialist finance house, pointed out that Britain had already cut greenhouse gas emissions by 12% and accused  industry of exaggerating the likely impact by up to 10 times. Anthony White, at Climate Change Capital, told the Guardian (17/1/04) that the entire reduction could be met by phasing out coal-fired power stations and switching to gas.

Margaret Beckett from DEFRA said that the EU Scheme ‘will be a vital measure in our drive to reduce emissions of greenhouse gases across Europe. We have set the overall number of allowances for UK industry at a level which moves us beyond our Kyoto Protocol commitment towards our tougher national goal and which recognises the need to preserve the competitive position of UK industry’.  It will be interesting to see if the government manages to stick to its target given the industrial pressure.

How the EU-ETS works

The aim of EU Emission Trading Scheme (EU ETS) is to reduce, in the most cost-effective way, EU emissions of greenhouse gases that contribute to the problems associated with global warming. The first trading phase runs for three calendar years from 2005-2007; thereafter, trading phases will run for five calendar years. Only CO2 emissions are included in the first phase of the scheme, but the EC may expand the scheme to include other greenhouse gasses (e.g. sulfur hexafluoride, methane) in the second trading phase. 

The scheme involves setting caps on emissions on a plant-by-plant basis.  Companies will be required to demonstrate, in April each year, from 2006 onwards, that they have met the emissions limits. Those exceeding these limits will  be fined Euro 40 a tonne,  rising in a second phase, from 2008, to Euro 100 a tonne. Companies will be able to buy credits from those undercutting their targets- so it’s a ‘cap and trade’ system, which should create a market for emission credits, which will be open to the entire EU- so  companies can trade with any other company in any other Member State. Accession States will also be included in the scheme. In the future, when and if the Kyoto accord goes live, or even perhaps if it doesn’t, it is expected that emission trading will become global.

The issue now is what levels the national carbon emission caps and company allowances should be set at. Each EU Member State has been asked to draw up a National Allocation Plan for submission to the European Commission, setting out the total number of emission allowances, each representing one tonne of carbon dioxide, to be allocated to the industry sectors covered by the EU ETS.  The UK’s proposals (see left) were published in Jan as a draft for discussion- the UK government said it ‘will monitor domestic emissions closely during the first phase of the EU ETS with a view to ensuring, through the second phase of the scheme and other policies, that we achieve our national goal of moving towards reductions in emissions of carbon dioxide by 20% on 1990 levels by 2010’ .

The installations covered include: the electricity generation industry; oil refineries; the iron and steel industry, the minerals industry, and paper, pulp and board manufacturing. Together the installations covered by the scheme account for about 50% of all UK carbon dioxide emissions.  The UK Government has stated in its Energy White Paper that the EU ETS will be a central plank of its future emissions reduction policies.  

More sun

On Jan. 7th Energy Minister Stephen  Timms  was asked a series of  Parliamentary Question   on solar heating. and the Clear Skies Initiative.

He noted that 1,445 applications for solar hot water heating systems had been received under the scheme and 1,368 had been accepted, to a total grant value of £684,000. 

He added that, of the 90 applications that the Department of Trade and Industry had received, for the installation of solar water heating systems from community and not-for-profit organisations, 67 had been offered grants totalling £955,766.02 .

He noted that, according to the Building Research Establishment there were  about 60,000 solar thermal systems installed. But he pointed out that ‘the Clear Skies initiative offers grants only to individual  householders and community and not-for-profit organisations.  No grants have been given directly to homebuilders.’

Turning to PV solar, he noted that the DTI estimated that about 1,000 homes currently had PV installed. There was a £10m, for  the installation and monitoring of PV systems in around 500 houses (30 projects) and 12-15 large scale public buildings, and the £20m   major PV demonstration programme, with over half the funding having now been allocated. Finally he said that the DTI was trying to remove barriers to the deployment of very small generators, such as PV, by  reducing  VAT to 5% for professionally  installed systems, and by making  connection agreements less complex.

They were also planning to amend the Renewables Obligation ‘to enable very small generators like PV to accumulate their production over a year, rather than a month, so as to  qualify for ROCs.

More Community Energy

Eight new energy-efficient schemes to heat homes, schools and other public buildings received more than £6 million, adding to the £22 million already handed out to projects under the government’s Community Energy programme. The new schemes between them will cost more than £32 million and cut carbon emissions by almost 4,000 tonnes a year. The awards include £13,991 to Buckinghamshire County Council to heat its Environmental Education Centre using saw mill waste. Walsall Metropolitan Borough Council gets £500,000 to heat flats and a primary school in one of England’s most deprived wards, with grants also to the Family Housing Association (£35,000) and Southampton University (£30,000). Other grant winners were Edinburgh University, Aberdeen University, Clydebank Housing Association and Midlothian Council, whose scheme will involve the first extraction of minewater heat on a large scale in Scotland. The full  award and project details will be in Renew 150.

Lord Whitty, Minister for Sustainable Energy, said: ‘The Community Energy programme continues to deliver real benefits to people at work, leisure and at home. We have allocated more than half the total £50m available, but there are still opportunities for communities across the UK to benefit. I look forward to receiving many more good bids, building a sustainable market for community heating, using both CHP and renewable energy.’

Community Energy was launched as a two-year programme in January 2002 and extended to three years last May.  It provides capital and development funding to refurbish existing and install new community heating schemes. It is funded from the Capital  Modernisation Fund and has £50m to invest from 2002-2005, with the aim of attracting up to £200m of further investment from other sources.

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