By Dave Elliott
PV solar is doing well in the UK with, on some reckonings, nearly 3 GW installed so far and much more planned, perhaps 10GW by 2020 being likely and possibly even near 20GW. On-land wind is also doing quite well, with 7.3GW in place, and despite planning conflicts and local opposition, a total of 13 GW likely by 2020, based on projects already built, under construction or permitted. Offshore wind is doing well too, with 3.7 GW in place and near 1GW likely to be added this year, including Gwynt y Môr (576MW) and West of Duddon Sands (389MW). All being well, similar amounts are expected in 2015 and 2016, taking the total to maybe 8GW by 2016/17, on the way to 10-11GW by 2020, maybe much more. www.windpowermonthly.com/article/1301372/windpower-data-offshore-installations-2014-16
However that all depends on new projects getting support under the new contract for a difference (CfD) system, and, although five offshore wind projects have got CfDs under the interim ‘early’ round, the government has announced a £205m p.a. cap on future rounds- and that’s to be shared across all the renewables. http://www.gov.uk/government/news/over-200-million-boost-for-renewables
The cash allocation cap is set up under two categories- ‘Pot 1’ with, from 2019, £50m.pa, for well established options, like on-land wind and large PV solar, with costs falling and support needs reducing, and ‘Pot 2’ with £155m p.a, for less established options like off-shore wind, geothermal, AD biomass, wave and tidal stream projects, which still need more support to get prices down- some more than others. Offshore wind is amongst the cheapest of the Pot 2 group, with the CfD strike price set at £155/MWh for 2014-2017, falling to £140 thereafter, and costs seem likely to fall to around £100/MWh after 2020. By contrast, the strike price for wave and tidal stream is set £305/MWh over the whole period up to 2019. So who will get the money? A 100MW tranche has been set aside for wave and tidal stream, so there will be less room (and cash) for the others. Gordon Edge, director of policy at Renewable UK, noted that even if offshore wind got the full £155m pa allocated to ‘Pot 2’ that would fund just one typical 500MW offshore wind farm ‘which is significantly less than we need’. Given for example the recent planning go-ahead for E.ONs 700MW Rampion project off Sussex and the many others in the pipeline, that’s quite an understatement!
It’s even tighter in Pot 1, where there are to be competitive contract auctions. With only £50m available p.a. for hydro, energy from waste, onshore wind, landfill gas, sewage gas and large-scale solar, the Solar Trade Association (STA) complained that, ‘even if all of this went to solar – which it won’t – this is only enough for 1GW of solar in this round, a considerable reduction on the current market’. The STA was particularly incensed by the government’s proposal to exclude large solar power projects (over 5MW) from support under the Renewables Obligation (RO) system from April next year, given that all the other technologies were not excluded, with the RO system still planned to be available up to 2017 for new projects and existing contracts under it running beyond that.
Large solar could seek support under the CfD, but the STA said that solar, with relatively small projects promoted by small business, was not well suited to it, and was ‘being exposed to this new Contracts for Difference system without having the back-up of the old scheme’. The CfD strike price offered was £120/MWh for 2014-16, falling in stages to £100 by 2018, but it would be in competition with on-land wind, with a strike price of £95/MWh falling to £90 by 2019, and with land fill and sewage gas at ever lower strike prices (£55 and 75/MWh respectively). Small PV can continue to get support under the microgen/domestic Feed In Tariff (FiT) and it’s still booming despite a cut in the FiT level, but otherwise, solar growth looks likely to be seriously limited. The STA said the cap could cut large-scale solar installations by about 65% to 80% next year.
What’s behind this? It would perhaps have been reasonable to expect solar to compete within the CfD system if it had the RO in the interim, so why exclude it? Well firstly, with solar farms booming around the UK (several hundred are in place or planned) visual intrusion concerns were rising, and local objections were emerging. And secondly, the rapid expansion was costing too much. DECC’s impact assessment says closing the RO to solar above 5MW from April 2015 will save up to £200m a year, from 2017, from its Levy Control Framework clean energy subsidy budget. That’s the extra it says it might cost if large solar farms were left to expand, perhaps reaching 6.3GW by 2020, under the RO, getting 1.4 ROCs/MWh this year, 1.2 ROCs in 2016. They said this money could be better spent. www.businessgreen.com/bg/analysis/2344769/are-solar-farms-really-too-costly-for-decc-s-budget
Well, we will see. The first full CfD auctions start this October, and then happen annually after that. Will large solar get squeezed out by on-land wind? That’s surely not what the Conservatives want. They have talked of constraining on-land wind, reflecting pressure from their (anti-wind farm) political base in the shires. Well maybe, actually, the £50m pa cap for Pot 1 will do that. Even if on land wind got it all (so killing off large solar), the rate of growth of on-land wind would also be cut: it’s been suggested that it might be halved: http://realfeed-intariffs.blogspot.co.uk/2014/07/government-cuts-onshore-wind-deployment.html.
Will offshore wind also get squeezed? That too would be perverse. Although more expensive, it was meant to be one of the main alternatives to on-land wind! Or will the overall cap be raised? It’s set under the Levy Control Framework (LCF) to limit low carbon support (i.e. the RO, FiT and the CfD) and consequent pass through to consumer bills. That has imposed an overall limit for 2014/15 of £3.5bn, rising in stages to £7.6 billion in 2020/21.
There have been calls for a rethink on the LCF cap. Certainly when and if the Hinkley nuclear plant project goes ahead, with its guaranteed £92.5/MWh CfD strike price, the overall cap will have to be raised. As the Daily Telegraph noted: ‘The budget post-2020 is yet to be set but at a minimum will have to expand to accommodate new nuclear plants, the first of which could start generating power – and therefore using up susbidies – from around 2024.’ www.telegraph.co.uk/finance/newsbysector/energy/10989789/Offshore-wind-farms-in-doubt-as-subsidy-pot-can-fund-just-one-project.html
The Hinkley project CfD allocation was not subject to a price cap or to the competitive contract auction process that now faces new renewable projects – Edf was the only player and also won a promise of a £10bn loan guarantee. It’s not clear what will happen with regard to next lot of major nuclear projects that the governments want us to support- 16GW initially, maybe more later. If a competitive CfD framework does emerge across the board, we can expect further head to head collisions as rival options seek funding. However with wind and PV solar likely to be cheaper than Hinkley by the time it starts up, any similar new nuclear projects will face stiff competition.
Meanwhile, what should the priorities be? Well, keeping consumer costs down is obviously important, but we are only talking small amounts -the RO has only added around 2% to bills, the FiT 1%, while the competitive CfD is expected to drive prices down, although DECC’s most recent impact assessment carefully noted that its estimates didn’t yet cover nuclear costs. We shall see! But if it was left to the public, the most recent poll indicated that 79% backed renewables (67% liked on land wind, 72% offshore wind, and 82% solar) and only 36% backed nuclear: https://www.gov.uk/government/statistics/public-attitudes-tracking-survey-wave-10
By Dave Elliott
In its 2014 review of renewable energy policy, part of its Electricity Market Reform deployment exercise, the UK Department of Energy and Climate Change outlined how it saw each key option developing: http://www.gov.uk/government/news/ensuring-value-for-money-and-maintaining-investment-in-renewable-energy
There have certainly been some changes since its 2011 Renewable Roadmap, which selected eight technologies as likely to be key to meeting the UK’s 2020 renewables targets. www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/re_roadmap/re_roadmap.aspx
PV solar was not amongst the selected eight. But now it’s a front runner. In its new report DECC says, ‘We consider solar PV now to be an established technology in the UK,’ and with 2.7GW or more in place that’s clearly true. And they add ‘Solar is anticipated to be the first large-scale renewable technology to be able to deploy without financial support at some point in the mid-to-late 2020s’. Didn’t it do well! Despite the cuts in Feed In Tariffs. DECCs main concern now seem to be that PV, especially solar farms, will expand too fast! They note that ‘Solar PV is a technology which can be deployed quickly even at large scale’. But they are worried about the costs and eco-impacts of large ground mounted projects and would prefer Building Integrated schemes, large and small. On costs, they accept that these are falling (which is why take-up has grown) and will continue to fall (in part due to the take-up), but they say ‘because the UK is a small part of the global market, it is likely that these cost reductions will largely occur independently of what the UK does’. And they have sought to limit the cost pass-through to consumers, most notably by entirely cutting Renewables Obligation (RO) support for large projects. Otherwise they say they might reach 5GW by 2020! Nevertheless they still talk of an overall possible 10GW of PV by 2020 and perhaps even 20 GW.
Wind power did feature strongly in the 2011 DECC review, offshore especially. Now, despite being the cheapest of the main new renewables, on land-wind has fallen out of favour in some circles (e.g.due to vociferous campaigning and some local opposition), although, as DECC says, ‘current installed capacity in the UK is 7.3GW, with a further 1.5GW under construction’ and ‘there is also a large potential pipeline of UK projects with 5.4 GW having received planning consent and a further 6.5GW currently in the planning system. This means we are well on our way to reaching our ambition for 11-13GW of onshore wind by 2020’. But by contrast offshore wind is seen the biggie: ‘Offshore wind is the most scalable of the renewable technologies, and it is the renewable technology that has the most potential to make a significant contribution to decarbonisation goals, if required. There is significant long-term potential for cost reduction and it is at an early stage of deployment – DECC’s central estimate is a 25-30% reduction in central costs by 2030, which could be higher depending on the level of deployment between now and then. The UK is the market leader for offshore wind, with the biggest pipeline to 2020, and deployment in the UK is therefore a key driver of cost reduction to 2020’. DECC had earlier said up to 39GW was possible by 2030. But that depended on the market. www.gov.uk/government/consultations/transition-from-the-renewables-obligation-to-contracts-for-difference
Wave and tidal stream also featured in DECC’s 2011 Renewable Energy Roadmap, which suggested that there could be 200-300 MW of marine capacity by 2020. That was much less than the 1-2 GW forecast in the Government’s Marine Energy Action Plan 2010, or even the 1.3GW by 2020 UK figure in the EU Renewable Energy Action Plan. And although the UK is still in the lead in this area, the new DECC Review reduces its expectations further: ‘Wave and tidal stream technologies are still at the demonstration stage and are not currently competing in the mainstream market. There are currently around c.10MW of wave and tidal stream capacity deployed in sea trial around the UK – more than the rest of the world combined. We anticipate that by 2020, wave and tidal stream could reach 100-150MW in the UK alone. This deployment could then increase quickly beyond 2020 to reach GW-levels in the late 2020s-early 2030s’.
Unlike heat pumps (still strongly backed), geothermal wasn’t in DECCs 2011 key options list, but a 2012 SKM study claimed that it could supply 20% of UK electricity from around 9.5GW of capacity. The new DECC review however relies on a 2013 Atkins report on deep geothermal power which suggested a possible best case potential of up to 3-4% of current average UK electricity demand. So it’s still seen as something of an outsider option, although worth backing.
By contrast, DECC is still very enamored of biomass, including EfW combustion, advanced gasification/pyrolysis, biomass CHP and AD from farm and other wastes. There are limits though, mainly related to land use constraints and concerns about the sustainability of importing biomass pellets for large biomass conversion plants. I’ll be looking at that in my next but one post.
The new DECC renewables review is just about electricity supplies, so it doesn’t look at solar or biomass heat (both being pushed quite hard by the Renewable Heat Incentive), or biofuels (on which progress is less spectacular). But arguably it does add up to a package might help the UK meet it 2020 15% renewable energy target. However, with the various cuts and uncertainties about the effects of the new Contracts for a Difference support system, that is not certain: DECC has just imposed a £205m p.a. cap on renewable CfD allocations up to 2020 which may constrain new offshore wind and large PV solar projects seriously. https://www.gov.uk/government/news/over-200-million-boost-for-renewables I will be looking at that in my next post. And beyond 2020 there are no renewables targets, with, under current policies, the continued expansion of renewables likely to be constrained by the commitment to nuclear and maybe shale gas CCS. But policies can change and with renewables costs falling, they may break through further and accelerate more, so there is still all to play for.
If so, what about grid balancing? DECC has confirmed that it will be seeking 53GW of contracted capacity for the new ‘capacity market’ for 2018/19, to help deal with supply shortfalls due to demand peaks, variable renewable inputs and plant or grid failures. For the moment much of this will involve existing gas plants that might otherwise be closed, given the increased output from renewables, but will be needed occasionally when that output is low. However any facility that can provide grid balancing services can apply to the capacity auction process in December, including storage and demand management. Contracted capacity will get a cash incentive for being available. DECC says it will add £2p to average annual consumer bills over the period 2014-30. https://www.gov.uk/government/news/britains-energy-security-strategy-now-fully-in-place
So what next? Given its excellent renewable resources, clearly in principle the UK could, if it wanted to, at least match the German ambition of getting 80% of electricity from renewables by 2050. Assuming that is Scotland, which has most of the resources, is still part of the UK! Carboncommentary.com noted that about 15 GW of 2020 renewables will be in Scotland or in Scottish waters. Only about 18 GW will be in England and Wales. So it said Independence would mean around 40% of total UK renewables capacity would disappear, but only 10% of UK electricity consumption. www.carboncommentary.com/2014/04/
DECC sees it differently, arguing that Scotland’s small population would not be able to sustain the cost of its large renewables capacity without the RO income from the rest of the UK – or a £189 p.a increase on Scottish consumer’s bills. But in reality wouldn’t the UK have to buy in, and continue to support, Scottish green power to meet it renewable targets? DECC also sees the nuclear issue differently, and, with the European Commission currently looking at the UK’s proposals for funding the EdF Hinkley project, Westminster has evidently warned the (anti nuclear) Scottish government that any negative representation it made to Brussels on this would be viewed as a ‘hostile act’. www.heraldscotland.com/politics/wider-political-news/minister-sought-to-dissuade-msp-from-role-in-eu-inquiry-inquiry.23914772
Clearly the independence referendum is going to be a lively affair!
By Dave Elliott
It is sometimes argued that small-scale community-based experiments with green energy projects can lead to new ideas and practices that can be spread widely – pioneering technological and social innovation. The ‘bottom-up’ grass roots approach has certainly been successful in the past. (more…)
By Dave Elliott
One of the big innovations in 2014 has been the rise of prosumers, consumers who generate their own power, fleshing out the vision Hermann Scheer outlined in his 2005 Solar Manisfesto: ‘Since everybody can actively take part, even on an individual basis, a solar strategy is ‘open’ in terms of public involvement… It will become possible to undermine the traditional energy system with highly efficient small-technology systems, and to launch a rebellion with thousands of individual steps that will evolve into a revolution of millions of individual steps.’
By Dave Elliott
A pan-European supergrid network could play a major role in helping Europe achieve an ambitious 45% share of renewable energy by 2030 at low extra cost, by balancing grids and limiting curtailment, according to a new Greenpeace report, PowE[R]2030, based on analysis by Energynautics, and using data from the International Energy Agency.
By Dave Elliott
Things are changing in Germany. With renewables booming, German energy giant RWE has suffered a massive loss of €2.8 billion, its first loss in 60 years. It has admitted it got its strategy wrong, and should have focused more on renewable and distributed energy rather than conventional fossil fuels: ‘We were late entering into the renewables market – possibly too late.’ A previous RWE CEO had gone on record with the immortal line: ‘Photovoltaics in Germany make about as much sense as growing pineapples in Alaska’. www.reuters.com/article/2012/01/18/germany-energy-idUSL6E8CI12Y20120118
Now Germany has 36.5GW of PV, supplying around 5% of its electricity and at peak times much more! And about 8% from its 33GW of wind. (more…)
By Dave Elliott
In my last post I looked at how competitive market pressures were being imposed on renewables by the UK coalition government, via new Contacts for a Difference contract auction processes. While progress is still being made, as the technologies develop and become more economic, the rapid expansion of some options does seem to be facing difficulties in the UK, arguably as a result of government policies- or, in some cases, the lack of them. (more…)
By Dave Elliott
Renewables are doing well, supplying around 22% of global electricity from around 1,560 GW of generating plant, and 19% of total global primary energy, according to the 2014 edition of REN21s annual renewable review: http://www.ren21.net/gsr
However, although they are still expanding, the rate of growth is slowing. Total global investment in clean energy fell 9% in 2013 to $254bn, following a 9% drop in 2012, according to Bloomberg New Energy Finance. Some of this was due to the reduced costs of PV solar, but in the wake of the global recession and increased market pressures, renewables do seem under some stress. That’s been reflected by (or some might say is the result of) the less than positive policies adopted by some governments. (more…)
By Dave Elliott
A socialist government was elected in France in 2012 on a promise to cut nuclear reliance from around 74% as now to 50% by 2025, but it has taken its time coming up with details. Some saw the lengthy public debate on energy that the new government initiated in 2013 as a stalling device, others welcomed it as a rare example (in technocratic France) of a ‘bottom up’ approach. But a decision has at long last emerged. (more…)
By Dave Elliott
PV solar is expanding fast in the UK, with over half a million buildings already using PV, and heading for 3GW in total. In addition to roof-top domestic units, over 120 utility-scale projects recently receiving planning approval, many of which are targeting completion within the next 12 months, according to the new NPD Solarbuzz UK Deal Tracker report. More than 325 solar farms in the MW class were scheduled to be completed mid year, over 60 with installed capacity above 10 MW. And an additional 444 large-scale ground-mounted solar PV farms are currently at various stages of planning: www.renewableenergyworld.com/rea/news/article/2014/05/uk-set-to-lead-utility-scale-solar-market-in-2014?cmpid=WNL-Friday-May2-2014
However, there are worries about visual intrusion, with Energy Minister Greg Barber saying ‘I do not want solar farms to become the new onshore wind. I do not want to see unrestricted growth of solar farms in the British countryside’ and that ‘We don’t want the whole solar sector damaged by a few solar farms that communities don’t want’. Instead, backing a new DECC Solar strategy, he announced plans to turn the Government-owned buildings, as well as factories, supermarkets and car parks, into ‘solar hubs’. He said: ‘There is massive potential to turn our large buildings into power stations and we must seize the opportunity this offers to boost our economy as part of our long term economic plan’. It was estimated that there were 250,000 hectares of south facing commercial rooftops.
In a further initiative, the Dept. for Education is working on ways to improve energy efficiency across the 22,000 schools in England and solar is one option. Education Secretary Michael Gove said: ‘Solar panels are a sensible choice for schools, particularly in terms of the financial benefits they can bring. It is also a great way for pupils to engage with environmental issues and think about where energy comes from.’
Overall, the Government aims to install 1GW solar PV generating capacity on the Government estate through a major programme led by DECC and Cabinet Office. As part of this, the Government will lead an initiative specifically targeted at England and Wales’ 24,000 schools. It will identify the first 500MW of deployment this year and seek private finance partners to incentivise installation.
The new Strategy follows the “Roadmap to a Brighter Future” which was published last October. Like that, it is very positive, talking of the possibility of getting up to 10GW of PV in place by 2020, and maybe 20GW. It showcases ‘how the UK is at the forefront of innovation in solar PV and its importance in driving further cost reduction, meeting the challenges of balancing the electricity system, securing carbon lifecycle benefits, and identifying new financial models to help households invest’. But as the Roadmap had noted ‘new solar installations will need to be appropriately sited, give proper weight to environmental considerations such as landscape, heritage and local amenity, and provide opportunities for communities to influence decisions that affect them’. https://www.gov.uk/government/publications/uk-solar-pv-strategy-part-1-roadmap-to-a-brighter-future
Issues like this obviously worry the likes of the Daily Telegraph, which pointed out that solar farm deployment had expanded from 46 large-scale solar farm projects at the end of March 2012 to 184 at the end of February this year. It noted that further 48 were due to start operating in March and an additional 194 projects have planning permission and are awaiting construction. And, as noted above, many more were envisaged. Its clearly an issue, although the RSPB and the National Trust have come out in support, saying that, if well planned, solar farms can be better for wildlife than traditional farming and have lent their support to new guidance from the industry. Even so, DECC has seen fit to propose cutting Renewables Obligation support levels for large solar farms, its ostensible justification being that, with the cost of solar panels falling, growth had been ‘much stronger than anticipated in government modeling.’
DECC said that, left as it was, large scale PV might reach 5GW by 2017, well above the 4GW maximum by 2020 they thought could be afforded, given the cap on spending on low carbon options designed to protect consumers from undue price rises. So DECC proposed that the Renewables Obligation (RO) for new solar PV capacity above 5MW be closed entirely from 1st April 2015, across England, Wales and Scotland, although with a grace period to protect developers who have already made significant financial commitments. The RO is in any case to close down completely for all new renewable projects from 2017, with the new Contracts for a Difference system taking over, and DECC say this is likely to be a more cost effective path for larger PV.
That may be true, but it’s as yet uncertain and quite complex, and understandably the Solar Trade Association was not pleased with the news of a new review : ‘We are disappointed that DECC is launching another review on the solar industry. Investor confidence and market stability is absolutely essential in order to deliver sustained cost reductions for consumers and a healthy solar industry for UK plc. We are also concerned that any excessively hasty push for cheap solar will come at the cost of achieving quality in the solar farm industry, which is essential to retain public support.’
More aggressively, PV installer Solar Century said ‘Large-scale solar is already significantly cheaper than offshore wind and will be competitive with onshore wind by 2017. In deliberately setting out to strangle the growth of cheaper solar from 2015, Secretary of State Davey can no longer claim that government policy will deliver the most cost-effective mix of technologies by 2020.’
The RO cut reflects the wider issue of overall allocations to renewables. They are constrained by the low carbon project budget limit, and DECC says that rapid acceleration of solar farm deployment had ‘the potential to affect the financial incentives budget under the Levy Control Framework’ which caps overall spending on green energy. So other projects could suffer. The issue is that, although PV costs are falling, that may not be sufficient to allow unconstrained growth, although of course it has been growth in PV markets around the world that has helped to cut costs. Much of that expansion has been due the Feed-In Tariffs around the EU (including the FiT for small domestic projects in the UK), but the FiTs have all been cut back and, in much of the EU, may soon be replaced by more market orientated auction systems, a bit like the UKs new Contracts for a Difference (CfD), following a new policy proposed by the European Commission. A version of that is soon to be adopted in Germany. You can see that either as a disaster or as evidence that PV is becoming economically viable. Be that as it may, domestic-scale PV is unlikely to get any support from the CfD in the UK, mainly just from the FiT system, if that survives, but as DECC says, larger projects can get support from the CfD, although there were none in the first interim CfD round.
Can large PV get its cost down? DECC says ‘Solar is anticipated to be the first large-scale renewable technology to be able to deploy without financial support at some point in the mid-to-late 2020s’. If that is true for large projects too, then even before 2020, it could be that the cost of larger expansion may be much less than feared. Or was it that they just wanted to inhibit large, allegedly intrusive, solar farms? But then what happens if large schemes do succeed under the CfD and come in at low cost?