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Green energy levy freeze

By Dave Elliott

The UK’s Autumn Budget may have backed Electric Vehicles, but it wasn’t too helpful in terms of providing extra support for the green electricity they ought to use, if we want carbon emissions to be reduced. Tucked away in the Budget details was a plan for replacing the Levy Control Framework, which caps spending on green energy projects, with a new ‘Control of Carbon Levies’ system.  It will cover the Renewables Obligation (RO), Feed-in Tariffs (FiTs) and the Contracts for Difference (CfD) systems as before, but the bad news is that, to keep future costs down, on the basis of current forecasts, there will be no new low carbon electricity levies until 2025’.

BEIS, the Department for Business, Energy and Industrial Strategy, says that it does not seek to cap or set a budget for low carbon electricity levies’, but the new control system ‘will not allow for new low carbon electricity levies to be introduced’. So it still amounts to a funding freeze. The existing FiT cuts for solar, the block on onshore wind and the other constraints already in place will cause spending on renewables to level off well before 2025, as BEIS data shows, but now no new funding will be allowed, although the BEIS forecast has not yet included the new £557m CfD round proposed in the Clean Grow Strategy. That’s likely to be mostly for offshore wind and gets through since the significant cost reductions that were achieved in the last CfD auction indicate that this support could secure far more low carbon electricity than originally anticipated’.

The freeze is just for new CfDs or support under other such schemes: since it has already been agreed, the Hinkley nuclear CfD still goes ahead, from whenever Hinkley starts up- 2027 seems to be the current guesstimate. With that big £92.5/MWh outlay impending, you can perhaps see why BEIS wanted to get the rest of the spending under control in the run up period, even if any new renewable CfD contracts involved would have been for much less, as is likely to be the case for the new CfD round that has been let through, as the last gasp.

However, there are let-out clauses: ‘New low carbon electricity levies may be considered if the aggregate of existing levies is forecast to have a sustained and significant fall in real terms. Given the volatility of the forecasts and their sensitivity to changes in wholesale prices, the government would look closely at the drivers and sustainability of any decline before considering possible additional levies.  Even if this condition is not satisfied, in order to ensure the lowest costs for consumers, new levies may still be considered where they have a net reduction effect on bills and are consistent with the government’s energy strategy’. Maybe something will sneak through, although there was no mention in the budget of the governments once-favoured Swansea Tidal lagoon!

After 2025, who knows? Hinkley may be even later than expected, or even get cancelled, and so BEIS, or its successor, may have to expand renewables fast. But as it stands, as BEIS indicates, support for them will tail off and then more or less flatline after 2023. By 2024-25 there would however be 41.67GW of large renewables in place, including 13.3GW of onshore wind (its growth being static from 2019) and 14.0 GW of offshore wind, plus 7.2GW of PV solar, along with 6.1GW of small scale renewables, almost 5GW of that being PV. So nearly 48GW in all.

That’s not tiny, but after that what? More offshore from the new CfD?  It does seem odd to ignore onshore wind while funding Hinkley with a lavish CfD.  The Public Accounts Select Committee has expresses concern about the impact of the latter on consumers’ power costs, at a time when renewable costs were falling dramatically:                 The Energy and Climate Intelligence Unit claims that 1GW of on-shore wind could cost £1bn less than an equivalent nuclear programme and using onshore wind would be £100m a year cheaper than doing so from new nuclear reactors: ‘The effective ban on the cheapest form of new power generation looks increasingly perverse’:

If on-shore wind and PV were put back fully on board, then, along with more offshore wind, the UK could be on the way to getting at least 50% of its power from renewables in the next decade, and possibly much more later. The UK may be out of it, but a 61% EU-wide target has been suggested as possible for 2030, up from the 49% planned: Looking further ahead, Germany’s Energy Watch Group and Finland’s LUT (Lappeenranta University of Technology) have produced ‘100% renewable power by 2050’ scenarios for 9 global regions and some countries within them, including a 100% renewables scenario for the UK/Ireland. In the latter, wind energy, on and offshore,  increasingly drives most of the system. Its share increases to about 59% of total power in 2050, as it becomes the least cost energy source. Their presentation indicates that the power system Levelised Cost of Energy (LCOE) ‘decline from 68.6 €/MWh to 47.7 €/MWh from 2015 to 2050, including all generation, storage, curtailment and parts of the grid costs. Beyond 2030 the LCOE further declines to 47.7 €/MWh by 2050, signifying that larger capacities of RE addition result in a reduction of energy costs. After an initial increase, the investment requirements decline after 2040’.

It notes that the cost of storage contributes substantially (34%) to the overall system cost, with batteries seen as the main element for backing up PV on a daily basis (~15TWh p.a. output by 2050), while significant gas storage is installed mainly to provide ‘seasonal’ (i.e. longer-term) storage for winter and long wind lulls (nearly 16TWh capacity by 2050), using SNG (6%) & bio-methane (94%). These inputs appear in their power chart as ‘bioenergy’ generation, although presumably some of this would be SNG from P2G electrolytic conversion, using excess wind-derived power. In addition, hydro reservoirs provide complementarity with solar and wind, with some of their reservoirs being used in pumped stage mode, as seasonal/long term storage.

The EWG/LUT near-100% global and country scenarios are pretty ambitious. But as they show, the resource is very large most places and can be balanced on the basis of their hourly supply-demand modelling:  Moreover, public support seem to be there for a big expansion of  renewables. A global poll of 26,000 people across 13 countries for Orsted found that 82% of the respondents thought it was important to create a world fully powered by renewable energy, with the figure for the Chinese sample being 93%:

The latest results from the UK government’s quarterly public opinion survey, of over 2,000 households between Sept. and Oct.2017, were similar. It found 82% supported renewables. Opposition to renewables remained very low, at 3%. PV was the most popular renewable, with 84% support, while 79% backed offshore wind, wave and tidal. 74% supported on-shore wind, and 69% supported biomass. That contrasts with the who 33% backed nuclear energy- a figure that drops to 26% who wanted more nuclear, in the global survey above. Maybe our energy priorities need rethinking..

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