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UK energy policy – grinding to a halt?

By Dave Elliott

At a meeting of the House of Commons Liaison Committee, which brings together the chairs of select committees, PM David Cameron in effect provided an overview of his take on key aspects of UK energy policy. It was quite revealing, with justifications being offered for the extensive cut-backs in support for most low-carbon projects, in order ‘to deliver low carbon at the lowest cost’. Very little seems to have survived unscathed.

In particular, he was asked what was the reason for the demise of the £1bn Carbon Capture and Storage competition. He said CCS was not getting cheap enough to run with at present, compared with other options. ‘So you spend £1 billion on carbon capture and storage, you get some carbon capture and storage capacity and it would cost you, at the current estimate, something like £170 per megawatt-hour. That compares with unabated gas costing £65, onshore wind perhaps costing £70 and nuclear costing, say, £90. […] Governing is about making decisions, and it seemed to me that the right decision was to say that we would not go ahead with the £1 bn, because that is £1 bn that we can spend on other capital investment projects, including energy projects such as making progress on energy storage or modular reactors’. http://data.parliament.uk/WrittenEvidence/CommitteeEvidence.svc/EvidenceDocument/liaison/evidence-from-the-prime-minister-12-january-2016/oral/26761.htm

Hopefully inadvertently, he labeled CCS as a ‘renewable’ option. It’s not – it’s for fossil fuel plants. He also seemed to a be little misinformed about some renewables, characterising tidal plants as offering ‘firm’ capacity. When asked about the lack of backing for the Swansea tidal lagoon, he started out quite positively, but then got a little carried away: ‘Instinctively, I can see the strength of the argument for tidal power, because one of the problems with renewables is whether they can provide base-load power. Nuclear can. Wind cannot, because it is intermittent. But tidal, because the tide is always going in or out, can provide base-load power.’

Well, that’s a little over simple. The tides follow the lunar cycle, so at slack tide times between ebb and flood tides, there is no energy available, and the amount available at other times varies over each neap and spring tide cycle, with the daily cycle also shifting in time progressively and often being poorly matched to energy demand cycles. Lagoons and barrages might be able to store some of the excess they produce during high tide/low demand periods, and use it to generate power at other times, so in that sense they might offer firmer power. But so could wind, if its surpluses were stored, using pumped hydro, or indeed pumped lagoons or barrages. By contrast, a network of small modular tidal current turbines, and possibly small barrages and lagoons, distributed around the coast, might offer more nearly firm power, since high tides occur at different times in each location: that is one unique tidal attraction.

However Cameron appeared innocent of these more complex issues. It was just a matter of up-front costs: ‘The problem with tidal power, simply put, is that at the moment we have not seen any ideas come forward that can hit a strike price in terms of pounds per megawatt-hour that is very attractive. That is the challenge for tidal. Maybe they can come up with something. They are very long-term schemes with big investments up front, and they can last for many, many years, but right now my enthusiasm is reduced slightly by the fact that the cost would be quite high.’

He didn’t have much to say about onshore wind power, except that ‘the cost has come down, so in my view it does not need to have the expensive subsidy’, though it was still ‘going to go from 9 GW in 2015 to 13 GW in 2020, so there is still going to be an increase’. However that is far from clear. Certainly beyond 2020. RWE Innogy has scrapped or put on hold UK onshore wind farm projects worth £1bn due to uncertainty about future funding. Amber Rudd has talked of 7 GW being blocked. Though that depends if the government can get its Renewables Obligation changes agreed against opposition from the Lords.

What about solar? Cameron kept off that. Maybe it was just too sensitive, given the ongoing battles and the general pattern of cuts. Cameron clearly backed the overall view that renewables could no longer expect subsidies, although the government had just relented a little on the big cut in the Feed In Tariff that had been proposed, reducing the cut from 87% to a mere 64%. However, it’s only a stay of execution. As DECC noted ‘the scheme will remain under review to ensure it continues to achieve its objectives until generation tariffs end in 2019’. That leaves very little standing in terms of support for new renewable electricity projects, just offshore wind, with maybe 10 GW more being supported in future CfD rounds, although even that is not certain. It depends on cost reductions.

The situation for non-electrical renewable options (see my next post on green heat) is not much better, despite it now being clear that this is a major weak point in the overall UK renewables programme. That means electrical renewables will have to supply more if the UK is to meet its 15% by 2020 EU-imposed renewable energy target. Although the UK may not be in the EU by then!

The UK has, however, made a commitment to cutting emissions within the wider UNFCC COP 21 agreement, which it can’t duck. Which may be one reason why, given that it is also trying to expand gas-fired generation (which will increase emissions), it is still clinging on to the hope (looking increasingly unlikely) that the £24bn Hinkley nuclear project will go ahead, along with the wider 16 GW new nuclear plant programme – whatever the costs! Otherwise it seems fixated on cutting costs, arguing that this is vital to protect the economy. Thus, as well as the cuts in the Feed-In Tariff and Renewables Obligation, it is to compensate heavy industrial energy users for the cost resulting from them, which it says risks reducing their international market competitiveness. So coal mining, quarrying, steel, aluminium, chemicals, plastics, textiles, paper and board production may all be eligible to get an 85% rebate – £13/MWh. Assuming, that is, that their energy use costs them more than 20% of their mean gross value added, or less (7%) for some selected areas, including perfumes and toiletries! For an eligible company using ~7,000 MWh p.a. of electricity the rebate would be ~£90,000. Maybe they could spend it on PV solar. www.gov.uk/government/uploads/system/uploads/attachment_data/file/492943/BIS-16-75-guidance-compensation-indirect_costs-renewables-obligation-and-small-scale-feed-in-tariffs.pdf

 

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One comment to UK energy policy – grinding to a halt?

  1. Dan Hatton

    It’s worth remembering that, when it was originally announced in early 2010, the “£1 billion carbon capture and storage competition” was actually a £9.6 billion carbon capture and storage competition. What did for the programme was the 89% cut to its budget in the autumn 2010 comprehensive spending review, not the recent withdrawal of the remaining 11%.

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