Renew On Line (UK) 74

1. Policy developments

 New Consultation on the 15% target

The governments consultation paper on its proposals for how to meet the target of obtaining 15% of UK energy from renewables by 2020, as required by the new EU plan, was about to emerge as we went to press. According to a leak relayed by the Guardian (21 June) it suggests that although  'we might just possibly reach 15% renewable energy by 2020', this would  require 'maximum build rates and a very rapid response from the supply chain'.

The electricity sector would bear the brunt of this: by 2020 between 30-35% of all electricity would have to come from renewables- as opposed to under 5 % now. Wind would lead.  On land wind capacity would expand six fold, with 3,500 turbines being installed around the country:  45% ultimately in Scotland, 18% in Wales, 10% in Northern Ireland and the rest in England. And there would be a very major expansion of offshore wind capacity- to 31GW.

According to the Guardian report, biomass would be the second big growth area:  nearly 6% of electricity would be generated from burning straw, wood, waste, and energy crops. In addition, on the heat side, sewage works and farms could supply bio gas to reduce dependency on conventional gas.

Microgeneration was, the Guardian said, the third main element in the plan. By 2020 it suggests there could be up to 7m solar heating systems installed on the roofs of buildings, with one in four households generating their own hot water from the sun. And there could be a 90% increase each year in the installation of ground and air source heat pumps, these together supplying 14% of all UK heating.

Other supply options get less attention. The plan it seems acknowledges that there are few sites left in the UK for large hydro-electric schemes, but hundreds of small scale energy generating schemes could be set up on rivers and canals. It doesn't expect tidal and other marine energy to become available significantly in the next decade.

Transport remains a problem area. According to the Guardian, the government still sees biofuels as being essential to meeting the 15% renewable target- but stresses the need to move on to more sustainable second generation biofuels  and suggests that, long term, biofuels may prove less suitable for road transport than for trains.

On the demand side, the proposals include new powers to force people to improve the energy efficiency of their homes when they renovate them; and measures to force people to replace inefficient appliances such as oil-fired boilers. To help them move on to cleaner options, there would be a combination of tax breaks, credits, outright grants, soft loans, one-off payments and other incentives. However, the Guardian said, while the government believes "feed-in tariffs" might encourage individuals and small business to generate their own green electricity, it does not consider this suitable for "bulk" power generators. Providing a 50% subsidy of the installed costs of micro-energy could it says lead to 160,000 solar electricity units being installed and 60,000 small-scale wind power turbines, it says.

According to the Guardian report, the government says the transformation of the country's energy policy will have "significant impacts on all our lives" and could cost £100bn- involving investment of up to 1% of GDP. But under the most plausible climate scenarios this might avoid having to pay up to 20% of GDP.  And the new policy could create major new markets -and 160,000 jobs.

More detailed coverage in Renew 175

FIT push rebuffed

An attempt to include commitment to a feed-in tariff (FIT) in the Energy Bill failed. Despite 33 Labour MPs defecting, the amendment, which would have required energy companies to provide long-term contracts guaranteeing a premium price for all renewable energy generated by homes, businesses and communities, was voted down.  It had clear cross party support- 276 MPs had signed up to an early-day motion supporting such a move, but in the event not quite enough.  The campaign had been led by Friends of the Earth and the Renewable Energy Association, with full page media ads, and it had received support (in a letter to the Guardian) from a group of senior academics. TV/pop star Lilly Allen also backed the move. The campaigners are still hoping the House of Lords will reintroduce an amendment.

Explaining his opposition, Energy minister Malcolm Wicks said: ‘It seeks to require the Secretary of State to introduce a feed-in tariff, but it does not specify the size of generation it covers. It could cover all sizes of energy generation, large as well as small.  If adopted, that could have a potentially serious effect on investor confidence. Whatever the merits of feed-in tariffs in other countries, we need to consider what will work best in the UK. I know that it is sometimes tempting to go to a country such as Germany and say that everything looks greener, but we need to beware of simple comparisons. Feed-in tariffs and the renewables obligation are simply different methods of providing support to renewables projects. There should be no theology about this. We are talking about different mechanisms and which mechanisms might be fit for purpose in the UK.’

He added: ‘We will launch a consultation this summer on what we should do to increase renewable energy use to meet our share of the EU 2020 target.  That will cover a broad range of issues and involve collaborative efforts across Government and with business, consumers and the wider community. The proposals will strive for the best value for money for UK taxpayers and consumers. As the Prime Minister explained in November, we want a serious national debate about how to achieve our targets’.  [the consultation paper has now emerged- see above: more details in Renew 175]

Hutton noted that  ‘as part of the strategy, we will examine a range of options further to support microgeneration, including a consideration of whether a feed-in tariff might be a better support mechanism than the renewables obligation for small-scale generation- I am thinking here of domestic dwellings, community schemes, small civic buildings and small businesses.’

Actually the REA did seem to be thinking in similar terms, at least as a first stage- not challenging the Renewables Obligation (RO) directly.  But that plainly didn’t work: certainly it’s clear that Wicks will not consider anything that sounds like dumping the Renewables Obligation- despite the fact that FITs, as used in most of the EU, have demonstrated their superiority, in terms of capacity maximization and cost minimisation, he still sees the RO as the main way to support large scale renewables in the UK. A FIT for micropower may however be OK- and the  BWEA and the REA are now campaigning on that.

·        So far Germany has installed 22GW of wind using a FIT system  compared with the 2.4GW in the UK, under the RO plus grants.

LCBP changes

While pressure for a FIT continues (see above), the Government has revamped its Low Carbon Buildings Programme (LCPB) and increased funding for public sector projects (e.g. for public buildings and projects run by charities) to 50% of project costs. However, it hasn’t allocated any new cash for domestic consumer projects. Friends of the Earth were aghast: it said consumer grants should also be raised to 50%, and the overall budget expanded ten times. It said that, so far, the LCPB ‘has been an unmitigated disaster’- over the last year, the domestic grants programme had actually created a drop in the rate of installations. ‘You would be forgiven for thinking that the Government was actually trying to destroy the small-scale renewables industry in the UK’.  But at least that means there is still a lot of money left unspent- £10m for household projects. So the government has extended the scheme to 2013.

The Renewable Energy Association was not amused:

‘Making a failing programme fail over a longer period is not a solution’. It added that the LCBP should be relabelled the ‘Slow Carbon Building Programme’. Like FoE, it wants a Feed-In Tariff for micropower projects: see p.3 &8.

Self-Gen FIT

Good Energy, the Green power retailer, wants a Feed-In Tariff for micropower  which limits support just to power produced and used on site, so as to optimise self generation and limit losses from transmission of exported power:  ‘Encouraging export encourages inefficiency’. To make legislation easy, it proposes a model based on ROC income, with micro-generation getting 5 ROCs per MWh generated, which it said ‘would deliver a potential income of 22.5p per unit of generation’. But surely being paid for export power would help make self-generation more economic?

£400m for clean energy

DEFRA’s 2008/9 budget settlement includes an increase in funding for clean energy technology, investments and enterprises to over £400m over the next 3 years.

As part of the new domestic Environmental Transformation Fund, the Carbon Trust will receive £47.4m for new energy technologies like offshore wind, third generation solar PV power, marine energy and biomass heating. This funding will also be used to increase the Trust’s energy-saving loans scheme for small and medium sized enterprises by a further £12m to £62m since 2003.

Over the next 3 years the government will also provide around £10m for a new anaerobic digestion demonstration programme. Up to four commercial scale facilities will show its potential for creating renewable energy, reducing greenhouse gas emissions and avoiding waste being sent to landfill.

·        In addition to the domestic ETF fund there is £800m to tackle environmental challenges in developing countries over the next 3 years; over £2bn for Sustainable waste infrastructure- via PFI credits; £2.15 bn for flood protection; and £3.9bn for the Rural Development Programme.

HSBC - £100m for renewables

HSBC has provided over £100m for up to 500MW of new public sector renewable energy projects over the next 5 years, via a funding deal with Partnership for Renewables (PfR), which was set up by the Carbon Trust in 2006, and is dedicated to installing renewable energy technology on public-sector land. HSBC’s environmental infrastructure funding arm has committed up to £18m for a 49% share in PfR. HSBC has also put up a £30m “revolving” loan to provide the construction capital to start projects up and then “recycle” the money as the projects come on stream, providing the firm with roughly £100m of equity. Hospitals, council buildings and universities could benefit. The 2008 budget called for all public sector buildings to be zero-carbon from 2018.

Green Heat

The government has been consulting on how to get more renewable and low carbon heat- it wants to realise 25m tonnes of CO2 savings by 2020 through the development of sustainable, low-carbon heat supplies, and said high-efficiency combined heat and power (CHP) was the single measure offering the greatest potential to deliver cost-effective carbon savings, with almost 12m tonnes of CO2 savings possible by 2020. Absolutely, and even if it’s not 100% green, consultant Bill Orchard, has argued that piped heat from medium/large scaled CHP can be a cheaper option in £ and C saved terms than retrofitting insulation in flats.

More on that controversial idea in Renew 175.

RO 2006-7 :OFGEM overview

OFGEM reports that the proportion of renewable energy to be supplied, set by the government for the 2006-07 obligation period, out of the total RO of 21.6TWh, was 6.7% of total electricity in England & Wales and Scotland and 2.6% in Northern Ireland. This proportion increases each year as set out in the Orders. Suppliers can meet their obligation by presenting Renewable Obligation Certificates (ROCs), which are earnt by generator for each MWh of eligible renewable electricity they produce; or by making buy-out payments, at a price set by the government, to cover any shortfall in the presentation of sufficient ROCs; or by a combination of both. OFGEM says that 32 suppliers had an obligation under the RO, 22 had an obligation under the ROS (the Scottish scheme), and seven had an obligation under the NIRO (Northern Ireland).

For 2006-07, it says the total Renewables Obligation for electricity supplied to customers was 19,390,016 MWh in England and Wales, 2,022,791 MWh in Scotland and 216,869 MWh in Northern Ireland.

The buy-out price for the 2006-07 obligation period was £33.24. The amount of buy-out paid per ROC presented for the 2006-07 obligation period was £16.04. The buy-out paid per ROC was equal across all three obligations due to the single recycling mechanism. The percentage of suppliers’ obligations met by presenting ROCs decreased during the 2006-07 obligation period. This has resulted in an increase in the total buy-out funds redistributed to suppliers.

It says one reason the percentage of ROCs presented by suppliers fell was the reduction in the maximum percentage of co-fired ROCs that a supplier may present against its obligation. This number of ROCs was reduced from 25% of a supplier’s total obligation in 2005-06 to 10% in 2006-07. In 2005-06 suppliers presented 3,381,650 co-fired ROCs while only 1,746,069 co-fired ROCs were presented in 2006-07.

Banning Biofuels

The Conservatives have called for the Renewable Transport Fuel Obligation to be suspended following the spate of reports on the environmental impacts of biofuels.  Shadow Environment Secretary Peter Ainsworth said: ‘It is utter madness to impose quotas for the use of biofuels without ensuring that they can be obtained from sustainable sources. There is a real risk that the British taxpayer will be contributing to the destruction of the rainforest and rising world food prices in the name of the environment. This would be worse than counter-productive.’

The government had signalled a partial retreat by announcing a biofuels review, but the Tories said that the RTFO will be up and running before the review has concluded- its first stage is already in operation.

*RSPB, OXFAM and Sir David King all say the biofuels targets should be reviewed: more research on impacts was  needed.

Doubling nuclear

The Labour Government has given tacit backing to a substantial increase nuclear power to 30-35% of UK electricity in the longer term- well beyond the replacement of existing plants, which currently supply about 18% of UK electricity, with EDF-linked Areva increasingly being seen as a likely vendor (of an EPR), and a pact with France being proposed for nuclear promotion worldwide. Meanwhile, the government is selling off its 35% share in British Energy- to EDF? So then, with French EDF, along with German companies E.ON and RWE, already owning much of the system, most of the sector would be run by a foreign companies. Hutton nevertheless has been talking of 100,000 jobs being created if the nuclear expansion goes ahead. But presumably not in the UK.

PRASEG looks to the future

The annual Conference of the Parliamentary Renewable and Sustainable Energy Group, held in London in May, looked at how the EU 20% by 2020 renewable energy target might be met, and in addition to all the usual electricity options like wind, it stressed the importance of heat suppliers- CHP in particular, large and small. Microgeneration still seemed popular, although perhaps not micro wind. There was some good lobbying for CSP and also for hydrogen, and plenty of calls for action rather than more studies. But the future still looks very uncertain. Nick Winser from National Grid outlined their projections- a business as usual scenario might lead to more reliance on coal, while gas would be at 45%, but it was also possible to have a scenario with coal cut to 9% of total energy, gas to 43% and renewables expanding to 35% by 2020- and perhaps 49% by 2030, with 22% coming from CCS.  But nuclear was then back up from 6% in 2020 to 22%.