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Tag Archives: EMR

Go slow on renewables

By Dave Elliott

‘Moving too quickly to zero carbon energy risks driving the bills of hardworking people too high’. That, from Energy Secretary Amber Rudd, in a DECC Blog on August 11th , seems to be the view underlying the government’s renewable energy support cutbacks. In her speech to the Conservative Party Conference in October she said that ‘as we have already shown, we will be tough on subsidies’, but insisted that the policy was fair since it simply was aimed at ‘getting the balance right between supporting new, low carbon generation and protecting bill payers’:


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UK Renewables progress: market pressures bite

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:

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…)

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EMR White Paper: reactions

The changes announced in the White Paper on Electricity Market Reform (see my previous Blog: support system will provide differential treatment for some energy options. The White paper says that the CfD approach is likely to lead to a more rapid decarbonisation trajectory than a guaranteed premium price Feed-In Tariff system since it ‘provides increased revenue certainty for low-carbon technologies, and therefore brings on low-carbon generation plant sooner.’ One way to read this is that it supports nuclear and maybe CCS more than renewables. Certainly many greens see that as the main purpose of many of the EMR measures, while the UK Energy Research Centre was still worried about having a single CfD mechanism, and a ‘one size fits all’ approach: its details would need careful design.

Nevertheless renewables will get supported, along with nuclear and CCS. Offshore wind is clearly favoured, with 18GW seen as possible by 2020, up from the 13GW in the 2009 Renewable Energy Strategy, and that was welcomed by the industry group Renewable UK. For the other renewables, the new DECC Roadmap, published in parallel with the EMR White Paper, says ‘the range of cost uncertainty is particularly large for technologies such as marine, which is at the early stages of commercial deployment in the UK, and biomass heat technologies, for which supply chains have not yet been tested at scale. Cost reductions are expected to be most pronounced for electricity technologies, particularly offshore wind and solar PV, as supply chains and technologies develop to 2020. The cost of generating heat and electricity from fossil fuels is also expected to rise over time’.

The PV solar lobby was perplexed by the exclusion of PV from the top 8 options selected in the DECC Renewable Roadmap, despite DECC’s acceptance that PV cost could fall dramatically. Solarcentury said, ‘The renewables roadmap makes it clear Government expects large-scale solar PV to be cost-competitive with offshore wind and dedicated biomass electricity generation, and cheaper than all marine in 2020.’ So why downplay it?

However, some commentators talked up marine renewables, which were included in DECC’s top 8, even claiming that ‘marine power will match nuclear and offshore wind for cost in 14years’:

That’s not impossible. The Carbon Trust’s new report on marine renewables says that ‘with targeted innovation energy generation costs for both wave and tidal stream technologies could reduce to an average of 15 p/kWh by 2025 – equivalent to today’s cost of offshore wind energy’ and also says that, with continued and targeted innovation, ‘the UK’s best marine energy sites could generate electricity at costs comparable with nuclear and onshore wind’ perhaps as soon as 2025.

Of course the offshore wind resource is very much larger. Even the optimistic PIRC study only put tidal stream at 116TWh, whereas the new DECC pathways study has offshore wind at 926TWh, while PIRC puts it much higher. But tidal is clearly coming on. Wave maybe less so. The Carbon Trust says that, on initial commercial deployment, wave costs could be £280 MWh, tidal £160/MWh. But it adds that developments overseas could speed up progress on wave in particular.

Heat pumps are in DECC’s chosen 8 top technologies and, if there is a lot of offshore wind or nuclear output, they may have a role (using the excess power they would produce at night when demand for electricity is low), though CHP/District Heating might be a better heating option in urban areas. But some of DECCs other, if only tentative, ideas, e.g. on network/grid balancing demand side management (DSM) and capacity support, could clearly be helpful. Business Green said ‘the announcement that demand response- cutting demand at peak times- will be able to compete with new power stations is a real positive. Using conservative estimates, National Grid estimates that 2GW of demand response could be available by 2020. This could prevent the need to build – and pay for- two large power stations alone. But the potential for demand response is much greater, at around 11GW, or a sixth of our current power demand’.

However the EMR White paper doesn’t do a lot for smaller renewable energy projects. Juliet Davenport, CEO of green energy supplier Good Energy, said the decision to press ahead with the CfD was worrying for projects below 20MW. ‘It’s a very complex instrument that will do little to encourage new independent energy generators but will favour the more established players. It restricts smaller suppliers’ ability to buy power and compete with those big suppliers who have been hiking prices recently, and that’s not good for the consumer.’

So what’s the final verdict? Most large energy industry interests were guardedly welcoming. The Telegraphs headline however was ‘The nuclear option may keep our lights on, but at what cost to the UK?’

Chris Huhne had warned that ‘the scale of investment needed to keep the lights on is more than twice the rate of the last decade,’ but made much of using competition to keep prices down as much as possible- and there was talk of challenging the effective market monopolies of the big six energy suppliers. But critics fear that, in its eagerness to find a way to support nuclear without direct subsidies, and maintain competitive markets, DECC’s complex EMR mechanism may not achieve either goal- or even yield as much carbon saving as hoped, with perhaps a new dash for gas emerging. Time will tell. But Friends of the Earth pointed out that gas prices have risen 84% since 2004, and domestic energy bills by 90%. Over the same period, the costs of renewables have increased to only about 1% of energy bills: ‘If we keep relying on dirty imported energy and expensive nuclear to power our homes, we’ll all pay the price for years to come.’

Prospective UK nuclear developer RWE was also surprisingly dour: ‘The mechanism can easily be changed by subsequent governments, thus long-term investment decisions are unlikely to be influenced by it.’ There’s no pleasing some! Even with a £16/ tonne Carbon floor price from 2013, rising to £30 in 2020 and £70 in 2030!

Some commentators were more positive, and there may be some benefits for renewables e.g. from the Carbon floor price, longer-term . But the CfD and the proposed auction system is not that different from the old Non Fossil Fuel Obligation, which was very ineffective at delivering successful projects. So some fear that renewables will not progress that well under the EMR, especially since the marine renewables budget has just been effectively halved, and the solar FiT cut by up to 70% for projects over 50kW. As for offshore wind ,18GW may be possible but, under the EMR, there are no renewable targets built in- it’s up to the market. Whereas 16GW of nuclear, and ideally much more, seem to be built into the governments thinking and, arguably, the EMR. So it was perhaps not surprising that the verdict on the EMR from the renewable energy magazine ReFocus was very bitter: ‘the UK Government seems to be on the way to pulling off a conjuring trick of shifting incentives towards nuclear and away from renewables, with hardly a whimper of opposition’.

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