Renew On Line (UK) 55

Extracts from NATTA's journal
Renew, issue 155 May-June2005

2.NAO on the RO

The National Audit Office (NAO) has concluded that the Renewables Obligation (RO) should help the UK meet its 10% target for renewables by 2010, but this will increase costs to the consumer and taxpayer by over £1bn a year by then, and increase the price of electricity by around 5%. It says that the cost of reducing emissions through the RO is currently significantly higher than other policy mechanisms which primarily incentivise energy efficiency, but it is ‘unlikely that other policy tools, such as a carbon dioxide tax, would yield the targeted level of renewable generation in the timescale required’. 

It notes that the RO provides the same level of financial support for all eligible renewable projects- so as to ensure that the most economic projects are developed first, while minimising Government intervention in the market. But ‘a consequence is that some projects using the cheapest technologies (onshore wind and landfill gas) at the best sites receive more support from the RO than necessary to see them developed’.  Unless policies change, by 2026-7 a third of the projects might therefore be overfunded.

RO not better than REFIT

The University of Cambridge Department of Applied Economics has produced a report which compares UK and German renewables support mechanisms- the Renewables Obligation and the Renewables Feed In-Tariff system (REFIT). Despite methodological differences, they  come to broadly similar conclusions to the those reached by Dave Toke (see Renew 153)-  although it is meant to deliver competitive prices, in fact the British Renewables Obligation system is not more cost-effective than the German REFIT system. In addition of course the German system has delivered far more capacity- 16,000 MW of wind compared to only around 800MW in the UK so far, despite our much better wind regime.

The report ‘Comparison of Feed in Tariff, Quota and Auction Mechanisms to Support Wind Power Development’  is  by Lucy Butler and  Karsten Neuhoff.  They note  in their abstract that ‘Price comparisons have frequently neglected differences in resource base: once accounted for we find the cost of policies to be similar. A developer survey identifies planning constraints as only one reason why installed capacity is greater in Germany, and indicates that price support is also important. Information provided by developers also suggests that although the tendering process adopted in the UK is highly competitive in terms of price paid for energy delivered, competition in other areas of the market is significantly lower than in Germany.’       See:   http://ideas.repec.org/p/cam/camdae/0503.html#abstract