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Tag Archives: tariff

In praise of auctions

By Dave Elliott

IRENA, the International Renewable Energy Agency, seems to have been won over to competitive price-based project auctions as a way to stimulate rapid take up of renewables.  It says ‘the main strengths of auctions relate to flexibility, price and commitments. The flexibility of design allows policy makers to combine and tailor different elements to meet deployment and development objectives, while taking various factors into account, such as the country’s economic situation, the structure of its energy sector, and the maturity of its power market’. That’s a bit of a shift: in the past much attention has been paid to guaranteed price Feed in Tariffs (FiTs). (more…)

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Which way for solar?

By Dave Elliott

‘The Future of Solar’, a major report from the Massachusetts Institute of Technology, US, looks at solar photovoltaics (PV) and also concentrated solar power (CSP). On balance it backs solar PV, advanced thin film systems especially, but says that, even with just current crystalline silicon, ‘material inputs for c-Si PV generation are available in sufficient quantity to support expansion to terawatt scale’: http://mitei.mit.edu/futureofsolar (more…)

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The end of the FiT

By Dave Elliott

DECC’s consultation document on the Feed In Tariff (FiT) says: The future and size of the scheme will be determined by affordability criteria’, with the Levy Control Framework limits clearly being central. It goes on: ‘If following the consultation we consider that the scheme is unaffordable in light of these criteria, we propose ending generation tariffs for new applicants from January 2016 or, alternatively, further reducing the size of the scheme’s remaining budget available for the cap. This consultation seeks views on the impacts of scheme closure, whether implemented in the immediate term or as a phased closure over several years’. This seems not so much a consultation as an ultimatum: accept interim cuts or the whole thing goes now, but it will end anyway with, they say, their proposed ‘more stringent degression mechanism and deployment caps leading to the phased closure of the scheme in 2018-19’.

(more…)

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Green energy cuts and subsidies

By Dave Elliott

‘Government support is designed to help technologies to stand on their own two feet, not to encourage a permanent reliance on subsidies. We must continue to take tough judgments about what new projects get subsidies’. So said Amber Rudd, the new UK Energy and Climate Change Secretary www.publications.parliament.uk/pa/cm201516/cmhansrd/cm150622/debtext/150622-0001.htm#1506227000002

Are the cuts to renewable energy support she is imposing sensible?

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PV solar in Germany

By Dave Elliott

PV solar continues its spectacular price reduction and that’s led to large-scale deployment, as in Germany, which now has around 36GW in place, and globally, with around 180 GW. PV was initially expensive, but prices are now much lower, thanks in part to Feed In Tariff systems around the EU, as under the EEG law in Germany, which has helped create a large market. With FiT levels now cut, will it continue to expand?

(more…)

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Capacity Market – the first UK auction

By Dave Elliott

In a fully free-market energy supply system there is no direct commercial incentive for generation companies to ensure that the lights stay on long term, by investing in new and/or backup capacity. Given that some old plants are scheduled for closure and more reliance on sometimes variable renewables is planned, the UK government has stepped in to create a new ‘capacity market’ to try to fill the potential gap in terms of reserve capacity and grid balancing capacity. (more…)

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Wind and PV fight for limited pot of money

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

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All change in Germany, the EU, and the US?

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…)

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Germany’s green energy

By Dave Elliott

Renewables have continued to grow in Germany, providing around 23% of total electrical generation from around 32GW of wind and 32GW of PV solar, most of this  being locally owned capacity, including  projects run by a growing number of local energy co-ops. And it works well: in bitterly cold March last year, the wind and PV were supplying about half of total electricity at one point:http://reneweconomy.com.au/2013/graph-of-the-day-wind-solar-provide-half-germanys-energy-output-88052.

(more…)

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Water and Transportation Nexus: US Domestic Water for Imported Oil?

Energy and water are inextricably linked. If we consider food as energy, which we should since it is the substance that powers our bodies, then the energy-water nexus is perhaps the most important in the agricultural sector. When we use agriculture to grow crops for biomass that is later converted to liquid fuels, then the energy-water nexus is even more apparent. I calculated how much water is used for driving light duty vehicles (cars, vans, light trucks and sport utility vehicles) and published the results in Environmental Science and Technology (10.1021/es800367m). Results are also summarized in a commentary in Nature Geoscience volume 1.

The results vary from 0.1-0.4 gallons of water per mile (0.2 – 1 L H2O/km) for petroleum gasoline and diesel, non-irrigated corn for E85 vehicles, and non-irrigated soy for biodiesel. Additionally, driving on electricity from the US grid consumes near 0.2-0.3 gallons of water per mile (0.5 – 0.7 L H2O/km). The reason is that water is used to cool off the coal, natural gas, and nuclear power plants on the grid. However, if irrigated corn is used to make E85 ethanol in the United States, then the water consumption jumps by one to two orders of magnitude to 10-110 gallons of water per mile (23-260 L H2O/km), with an average of 28 gallons of water per mile driven. Keep in mind that only about 15-20% of corn bushes are irrigated to any extend in the US.

This information is only an introduction to the energy-water nexus, but the US government is looking at it more closely recently due to research showing how constraints on one side can create problems for the other. This is typified by potential legislation proposed by Senator Bingaman: The Energy and Water Integration Act of 2009. This bill use similar language as in my Env. Sci. and Tech. paper in measuring the life cycle impact of water for transportation in terms of water consumed per distance traveled. Hopefully, research, industry, and government efforts can minimize impacts on water resources and use them wisely for our energy future.

The concept of using water resources sustainably, especially for growing biomass for liquid fuels, makes one wonder about water embodied in imports and exports in general. Is it better for the US to import biofuels from Brazil that are grown from sugar cane that might not stress water resources as much as corn agriculture does in the US? The US has a tariff on imported ethanol, but not imported oil. If the US has an energy policy goal of reducing imports from the Middle East, then it seems like the tariffs would be switched since the US has friendly relations with the Brazilians. So it seems the current US energy policy is to literally trade domestic water for foreign oil. I guess it could be worse.

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