By Dave Elliott
The overall context for UK energy policy and the prospects for renewables have taken something of a hit following the narrow referendum vote to leave the EU, with the climate for new investment looking uncertain. In what may become a familiar pattern, leading German engineering company Siemens has put new wind power investment plans in the UK on hold, and more may follow if the economy continues to falter. It certainly looks grim: www.theguardian.com/environment/2016/jun/28/leave-vote-makes-uks-transition-to-clean-energy-harder-say-experts and http://uk.reuters.com/article/uk-britain-eu-renewables-idUKKCN0ZH4CZ
Meanwhile, politics is in flux, with a flurry of realignments and changes, some of them involving those active in shaping energy policy. For example, during the still ongoing battle over Jeremy Corbyn’s leadership, Lisa Nandy resigned as Labour’s energy secretary. So did shadow energy minister Dr Alan Whitehead, Labour’s long-standing green energy supporter and PRASEG chair. And Conservative energy minister Andrea Leadsom is standing in the contest for replacement Prime Minister.
Brexit has still not been formalized and the worst may yet be avoided or fudged under whatever government and leader emerges, but large political and economic impacts are likely as the UK enters uncharted waters: https://energyfutureslab.wordpress.com/2016/06/28/is-brexit-really-brexit-at-all-and-what-will-it-mean-for-us/.
Conservative Energy and Climate Secretary Amber Rudd tried to mount a damage limitation exercise: ‘While the decision to leave the EU is undoubtedly significant, the challenges we face as a country remain the same’. The government remained ‘fully committed’ to facing up to climate change and to ‘delivering the secure, affordable, clean energy our families & business need’. She added ‘There have been significant advantages to us trading energy both within Europe and being an entry point into Europe from the rest of the world. Europe has led the world on acting to address climate change. The economic imperative that drove those relationships has not changed, an openness to trade remains central to who we are as a country. As the Prime Minister said, we will work towards the best deal possible for Britain’. www.edie.net/news/11/Amber-Rudd–UK-won-t–turn-our-back–on-climate-change-after-Brexit/
While the Brexit battle unfolds, the already established energy programme rumbles on, focused on security of supply and infrastructure development, including heat networks. Rudd said ‘we remain committed to building a secure, affordable low carbon infrastructure fit for the 21st Century’. https://www.gov.uk/government/speeches/amber-rudd-speech-to-the-business-climate-summit
Subsequently the government set a target of reducing carbon emissions 57% by 2030 on 1990 levels, accepting the Committee on Climate Change proposals and allaying fears that this legally-binding fifth carbon budget would be weakened by the EU referendum. The target is tougher than the EU target to which the UK signed up, which requires a 40% cut by 2030 on 1990 levels: www.gov.uk/guidance/carbon-budgets However, in part this seems likely to be reliant on Hinkley and a large nuclear expansion, which Brexit may undermine. We shall see.
Next up, there should be a new round of the capacity market auction process. We’ve had three auctions so far. Two market-wide, four-year ahead auctions were held in December 2014 (for delivery in 2018/19) and December 2015 (for 2019/20), clearing at £19.40/kW and £18.00/kW respectively, and securing 49.3GW and 46.4GW of capacity for delivery in those years. In both of those the emphasis was, controversially, mostly on existing conventional capacity – fossil and nuclear. Not much use for fast grid balancing! A smaller-scale Transitional Arrangements auction, focused just on the Demand Side Response (DSR) sector, was held in January 2016, securing 803MW of DSR for 2016/17 at a clearing price of £27.50/kW. Over half of the winning DSR capacity was new, which seems more helpful. The next auction is due later this year. www.emrdeliverybody.com
However, on the supply side, cut-backs continue. Following on from the cuts to solar PV and onshore wind support, DECC has proposed to completely cut Feed-in Tariff (FiT) schemes for large anaerobic digestion (AD) and severely reduce subsidies for small and medium scale plants, so as to stay within the Levy Control Framework cap and limit consumer power costs. FiTs for small and medium sized AD plants (250-500kWe) would be cut by 27% by January 2017, while any AD plant 500kWe or above would have FiTs removed completely by then: www.gov.uk/government/consultations/review-of-support-for-anaerobic-digestion-and-micro-combined-heat-and-power-under-the-feed-in-tariffs-scheme
The Renewable Energy Association said the proposed tariffs for small and medium scale AD plants would be around 46% and 35% lower than the ‘minimum viable levels’ that it recommended during its response to the 2015 review of FiTs: ‘We see support being given to new gas power plants, as well as to fracking. Biogas is a domestic source of low-carbon energy, is delivering new electricity and heat capacity now, and has strong public support, yet faces drastic cuts. There’s an opportunity here with AD to significantly reduce GHG emissions, to repurpose unavoidable food wastes, and to provide dispatchable low-carbon heat and power. Despite this, our ambitions to grow the sector remain frustrated.’
The Anaerobic Digestion and Bioresources Association said: ‘Removing support for new plants above 500kW is completely unjustified and will kill off projects which could otherwise have delivered DECC’s objectives while representing good value for money’. It does seem odd – DECC was supposed to favour the use of wastes over energy crops, and AD allows for the retention of nutrients, unlike direct biomass combustion. ADBA’s CEO also noted that ‘Where biogas really stands out is its flexibility. You can decide, when you produce biogas, whether you want to combust it for electricity and heat or whether you want to upgrade it to biomethane and inject it into the gas grid or use it for transport fuel. That flexibility is very important, because it can decarbonise difficult areas like the gas grid, so decarbonising home heating without the need to change the boilers and heating systems that people use. It can decarbonise heavy goods transport where there aren’t too many alternatives and it can provide efficient electricity and heat for on-farm or on-site use. On the electricity side, it’s particularly important that the biogas is produced constantly, 24 hours a day, 365 days a year, meaning it can help to balance the intermittent renewables, providing that baseload capacity which helps avoid capacity constraints on the electricity network. Potentially, if it was well incentivised, it could also provide dispatchable power and meet peak demand’. ADBA CEO Interview: www.renewableenergymagazine.com/article/uk-renewables-threatened-again-rem-talks-to-20160602 Also see http://www.telegraph.co.uk/business/2016/06/05/farmers-lead-backlash-against-green-energy-subsidy-cut/
With Ecotricity, Good Energy and Green Energy all offering their customers increasing amounts of biomethane via their green gas tariffs, but limited by how much biogas is available, it does seem odd to be cutting back on support, especially given that green heat should be a key area for expansion if the UK is to meet its 15% by 2020 renewable energy target. But that’s a mandatory EU target, and following the Brexit vote, it may soon no longer apply…that’s unclear. It is just one of the many energy and climate policy questions raised by Brexit: www.carbonbrief.org/brexit-94-unanswered-questions-for-climate-and-energy-policy