By Dave Elliott
The UK Department of Energy and Climate Change (DECC) seems to be on a mission to cut back support for renewables across the board – so as to save money. The scale and pace of change is stunning. Will anything be left?
DECC admits that the new policies may have a big impact. For example, in terms of the sudden withdrawal (from Oct 1st) of pre-accreditation for Feed in Tariffs (FiTs) it said ‘we recognise that this decision will introduce considerable uncertainty in the short term, but consider that it is necessary to safeguard spend under the scheme while we carry out the FIT Review’, although, actually, that review may do away with FiTs altogether – by January! www.gov.uk/government/consultations/changes-to-feed-in-tariff-accreditation
The Renewables Obligation (RO) is almost dead and with it many on-shore wind projects. The Renewables Heat Incentive looks like it might be next, following the fate of the Green Deal, and the Zero Carbon Homes policy. But there may be more. On the power side, the cuts and limits so far (to the RO and FiTs) have focused on solar and on-shore wind. But will offshore wind be next?
Up to now, despite its relatively high cost, offshore wind has escaped cuts and is expanding with, according to RenewableUK (RUK), on top of the 27 UK operational offshore wind farms (over 5 GW in all), more under construction, and 22 further projects having or seeking planning approval – almost 14 GW. However they will need funding and the expected next round of Contracts for Difference (CfD), the main future mainstay, has been delayed or may even be cancelled.
Some of the new offshore wind projects may also not get planning approval. The demise of the Navitus project does not bode well – that was a planning decision, based on the allegedly high visual impact on the Jurassic Coast – a World Heritage site. The 970 MW project was due to be built in the English Channel 13.4 miles off the coast from Bournemouth and 10.9 miles from the western tip of the Isle of Wight. Comparisons had been made with the Rampion project, off the coast from Sussex, which had been given the go ahead, but the Navitus site was claimed to be more sensitive. That also applied to the scaled down 630 MW version that was offered as a fall-back. www.gov.uk/government/news/planning-decision-for-navitus-bay-offshore-wind-park
There have also been some offshore wind retrenchments e.g. Forewind recently cancelled its Dogger Bank expansion – Teeside C & D, and last year saw the withdrawal of the Atlantis project off Wales/North Devon. But until the Navitus decision, RUK says only one offshore wind farm had previously been refused consent – the 540 MW Docking Shoal, off the north coast of Norfolk, in July 2012.
Even so offshore wind projects are clearly sensitive and we may see more cuts and dramatic policy shifts, reflecting concerns about costs or wider strategic issues. There has been media speculation about possible changes in response to new technology. The Daily Mail’s money supplement noted that Stephen Lovegrove, Permanent Secretary to DECC, had told a Parliamentary Committee: ‘One of the things we’ve recently learnt is that technology across the energy system moves much more quickly than we thought.’ In particular, smart grids and dynamic energy demand management are it seems being portrayed as ways to meet emissions targets (and perhaps allow continued use of fossil fuel) without having to use allegedly expensive renewables. Lovegrove said: ‘It may be that energy efficiency measures mean those carbon targets may be achieved through reducing demand rather than replacing generation.’
Warming to the theme, and adding energy storage to the mix, the Mail feature suggested that, in an expected new policy move, Energy Secretary Amber Rudd, ‘will focus on how technology could transform the industry’ and quoted a ‘high ranking energy source’ as saying ‘the changes we see coming at an extraordinary pace will result in central power generating capacity becoming redundant. It will mean fewer of everything including fewer big power stations.’ This, the Mail noted, was after a further delay to Hinkley had been announced. Could it be DECC is preparing to ditch it and also other major projects, including large renewables? Can smart grids and dynamic energy management systems really enable that? Although they can reduce (delay/time shift) peak demand, their main attraction is that they can be used to balance variable renewables, not replace them. Or nuclear. http://www.thisismoney.co.uk/money/news/article-3223539/New-power-stations-ll-just-use-electricity-Britain-s-new-Energy-Secretary-outline-plans-Autumn.html
For the moment the focus is still on costs but, in some ways, the relatively high cost of offshore wind provides DECC with a helpful contrast to the cost of the Hinkley nuclear project. Although Chancellor Osborne got it a bit wrong when he claimed that the Hinkley deal (with a £92.5/MWh strike price) was ‘still substantially cheaper than other low-carbon technology such as offshore wind and onshore wind’. That raised some hackles, since on-shore wind (and PV) projects are going ahead now with CfD strike prices of around £80/MWh. Moreover, although it does cost more at present, by 2023, when Hinkley was originally meant to be ready (more likely now, 2024/5, if it goes ahead), offshore wind may cost less: some projects are already going ahead with strike prices of between £114.39 and £119.89 per MWh. £100/MWh or less by 2020 seems likely. And by 2024/5 it could well be cheaper than Hinkley. But certainly on-shore wind wins out now, with an IRENA estimate, including the cost of back up/integration, clearly showing on-shore wind as cheaper than the projected cost of Hinkley (see p 42): http://www.irena.org/DocumentDownloads/Publications/IRENA_RE_Power_Costs_2014_report.pdf and http://energydesk.greenpeace.org/2015/09/09/factcheck-does-the-uk-finance-minister-know-how-much-hinkley-costs/
It’s possible that new nuclear plant designs may cost less at some point in the future, but so will wind and PV, while to many (including now the Financial Times), Hinkley seems to be a busted flush and the most expensive option: www.ft.com/cms/s/0/b07291aa-56ef-11e5-9846-de406ccb37f2.html
What next? It may be that, always assuming it is not done away with, the CfD system will be revamped to make the current mess more coherent. A new Policy Exchange report, ‘Powering Up: The future of onshore wind in the UK’, even says that, rather than being excluded from Contracts for Difference, onshore wind should continue to receive CfD support, albeit with the subsidy element phased out in stages, so that they effectively become ‘subsidy free’ by 2020. It predicts that this would help the onshore wind industry reduce costs from £85/MWh to approx. £60/MWh by 2020, putting it on a par with new gas plants. This from a right-wing group! www.policyexchange.org.uk/publications/category/item/powering-up-the-future-of-onshore-wind-in-the-uk
So there’s hope yet – even PV might get support again. The IEA’s new report on energy costs seems to confirm the UK Solar Trade Association’s view that PV in the UK will be cheaper than gas by 2018 and Agora’s view that it will fall to 4.2-10.3 p/kWh by 2025, 2.0-7.4p/kWh by 2050: http://ow.ly/RG28u
What we now need are some targets for the next phase, post 2020 – something DECC seems loath to provide. It’s all meant to be up to the market. However, Energy Secretary Amber Rudd has said ‘we intend to set out plans for continuing support beyond 2020, providing a basis for electricity investment into the next decade’. Fine, let’s see it soon: www.gov.uk/government/news/combatting-climate-change-a-vital-safety-net-for-families-and-businesses Though judging by some of the analysis of the policy changes over the last year, it’s not looking very hopeful politically, with a long de-greening game unfolding: http://blogs.sussex.ac.uk/sussexenergygroup/2015/07/27/osbornes-long-game-the-politics-behind-the-down-scaling-of-low-carbon-policies