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UK Renewable Investment – the right priorities?

by Dave Elliott

The share of renewables in UK electricity supply reached a high of 23.5% in the third quarter of 2015 (Q3), up 5.9% from 2014 Q3, and it seems likely to continue to grow as more projects come on line. However there are some problems. UK investment in renewables reached around £14bn in 2015, but has focused increasingly on the more costly offshore wind option: £8bn was invested in it in 2015. With the government block on support for cheaper on-shore wind and its slowdown of PV solar support, that arguably imbalanced pattern will get worse. It means less capacity per £ invested. Bloomberg forecast that over the next 5 years the UK will in effect lose at least 1 GW of renewable capacity. As offshore wind moves down its cost-reduction curve, the situation may improve, if then the money saved can be spent on other projects, but Bloomberg says ‘without some form of change in policy support, we could see investment drop off a cliff after 2019′. 

The Institution of Mechanical Engineers offered an even gloomier view in its short report ‘Engineering the UK’s Electricity Gap’. It said that the UK was facing an unprecedented ‘energy gap’ by 2025, with rising demand for electricity likely to outstrip supply by 40-55%, given the closure of coal and nuclear plants and slow progress on their replacement. Hinkley would not be ready by 2025 and few new gas CCGT plants were going ahead, and no CCS! Maybe so, but it didn’t seem to notice that electricity demand has fallen year by year. It assumed that electricity would increasingly be used for heating and transport, as is the government’s current plan, with gas (including shale gas) being used for electricity generation and not for heating, and private electric vehicles being widely adopted. There are alternative approaches: e.g. biogas/green syngas for heating (via CHP/ local heat networks) and for buses and trucks, and major energy saving upgrades. The IMechE did see some of that as sensible: the National Infrastructure Commission should ‘take urgent action to prioritise greater energy efficiency by industry and clarify financial incentives for research and development of renewables, energy storage and combined heat and power’.

However its emphasis of R&D may be thought to be a bit misleading:  most of the wind and solar technologies are now well beyond the R&D phase, and moving into widespread  deployment. That’s true even for advanced ideas like floating offshore wind.  Norway’s Statoil has made a final investment decision to build the world’s first floating wind farm, the Hywind pilot park, offshore from Peterhead in Aberdeenshire, Scotland, with an investment of around NOK 2 billion. Statoil will install the 30 MW wind turbine farm on floating structures at Buchan Deep, 25 km off Peterhead. It will cover around 4 square kilometres, at a water depth of 95 -120 metres. The average wind speed in this area of the North Sea is around 10 metres per second.

Hywind is a unique offshore wind technology developed and owned by Statoil. The concept has been verified through six years of successful operation of a prototype installed off the island of Karmøy in Norway. Hywind, with its simple spar buoy design, is said to be competitive with other floating designs in water depths of more than 100 metres. The capital cost of the units to be installed in Scotland is said to be 60-70% lower per MW than for the Hywind demo project in Norway.

Meanwhile, with more conventional technology, DONG Energy has announced its final investment decision to go ahead with its giant 1.2 GW Hornsea One offshore wind farm, using 7 MW turbines, 120 km off Humberside, further out than most so far. It will cover an area of around 407 sq. km:

In parallel, despite government cutbacks in support, UK solar PV is still booming. It has reached over 10 GW total, according to the Solar Portal, and some say it could reach 13-14 GW before the deadline for the new lower support levels kicks in. There is some room for debate over the exact figures since they depend on, amongst other things, whether prequalified but not yet operating units are included. DECC had put the live total at 7-8 GW last year and had earlier forecast a rise to around 10 GW by 2020, while more recently suggesting it might reach 13 GW by then. But either way it’s clear that PV is rising fast as costs fall.

What next? Energy secretary Amber Rudd has confirmed that there are currently no plans for solar to be given future contracts under the Contracts for Difference (CfD) mechanism: ‘We don’t have plans at the moment for a large-scale solar contract. What we have found is that large-scale ground-mounted solar have confirmed to us that they do not need any subsidy and that they can continue, subject to planning permission, because costs have fallen to such a great degree they can continue without any form of contract.’ Solar Portal commented: ‘the confirmation will come as a significant blow for large-scale projects left stranded by the premature closure of the Renewables Obligation scheme and developers with any interest in the CfD process, which was originally designed to replace the RO’. Three more CfD rounds are expected up to 2020, but Rudd’s statement implies that PV will not be included. Both Rudd and energy minister Andrea Leadsom had alluded to this being the case by referring to the CfD process as ‘offshore wind auctions’. While PV is now deemed ‘subsidy free’!

None of this is very surprising. The government is trying to block large rural solar farms. But some are still going ahead. The 50 MW project at Wroughton Airfield near Swindon is rushing to beat the grace period completion deadline. And brown field sites may still win! Or floating PV systems. Lightsource and Ennoviga Solar are deploying over 61,000 floats for a 6.3 MW solar array covering a tenth of London’s Queen Elizabeth II reservoir, near Walton on Thames, in a residential area. It will help power a nearby water-treatment facility and help Thames Water meet its target of self-generating a third of its power by 2020.

The situation for the as yet less-developed options is less positive. For example, an independent review of tidal lagoon energy has been set up to examine its feasibility, with that being seen by some as adding yet another delay to the proposed £1bn 300 MW project off Swansea. Energy Minister Lord Bourne said it was an ‘exciting, but as yet an untested technology’ and he wanted ‘to better understand whether tidal lagoons can be cost effective, and what their impact on bills will be – both today and in the longer term. This review will help give us that clarity so we can determine what role tidal lagoons could have as part of our plans to provide secure, clean and affordable energy for families and businesses across the country.’ The review will look at the cost effectiveness of tidal lagoon power as part of the UK energy mix, the potential scale of opportunities in the UK and globally, including the supply chain, ways of financing tidal lagoons, what size the first such project should be and the scope for competition in delivering lagoons. A very broad and general remit, then, putting the whole thing into the future, whereas the Swansea Tidal Lagoon project team had been looking to CfD agreement soon! DECC said no final decision would be made until the outcome of the review was made public, expected in the autumn. Meanwhile Ecotricity has claimed it might be able to offer a cheaper option.   and   Ecotricity:

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