This site uses cookies. By continuing to use this site you agree to our use of cookies. To find out more, see our Privacy and Cookies policy.
Skip to the content

[IOP] A community website from IOP Publishing

Tag Archives: White Paper

More changes in Germany

By Dave Elliott

Germany  is pushing rapidly ahead with renewables, aiming to get 80% of its electricity from them by 2050.  The nation briefly obtained 78% of its electricity from renewables in the summer. But that was obviously a one-off event. Even so, averaged annually, it’s over 30%:


Posted in Renew your energy | Tagged , , , , , , | Leave a comment | Permalink
View all posts by this author  | View this author's profile

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’.

Posted in Renew your energy | Tagged , | Leave a comment | Permalink
View all posts by this author  | View this author's profile

EMR White Paper: all change

The White Paper on UK Electricity Market Reforms emerged in July, just after the last minute withdrawl of the new Energy Bill, which contained the proposals for the much-touted Green Deal, offering (commercial) loans for domestic energy improvements. It seems there was Treasury concern about the cost- and no time for parliamentary scrutiny before the recess. It will be back later though. The EMR White paper, like the revised National Policy Statement on energy, evidently had priority- perhaps because of their relevance to the ‘urgent’ nuclear programme. The NPS was duly agreed, confirming the eight new nuclear sites.

The final EMR plans are much as in the initial proposal- a carbon price floor (allegedly giving more certainty to investors in low carbon tech); a capacity support mechanism (though it won’t be firmed up until the end of the year); a long-term ‘contracts for a difference’ (CfD) system, possibly with auctions (replacing the Renewables Obligation, and also covering CCS and nuclear); and new emission performance standards (effectively blocking coal without CCS).

Energy Secretary Chris Huhne said the aim was to get to low carbon in a cost effective way by increasing market competition, but with extra support being available for key new technologies- he announced a special £30m allocation for offshore wind subject to cost effectiveness assessment. He saw the EMR as the biggest change since electricity privatisation.

So what will change? Well, when and if it all rolls through the parliamentary process in 2012/13, from 2014, the CfD would mean that technology choice will be even more driven by the market, with no set capacity obligations, but a claw back mechanism to avoid wind- falls if prices fell. The fixed price Feed-In Tariff system, seen by most people as favouring renewables, was not adopted. So nuclear may well benefit most.

In the Parliamentary debate on the White paper, Huhne was upbeat about offshore wind (so sidelining fears that it was to be cut back- though that may still be the result of the CfD). He backed on-land wind (against objections from a back bencher), saying it was about the same cost as nuclear, but was unrepentant about blocking large PV solar projects- ‘the size of tennis courts’. There was a fixed budget and we had to avoid ‘boom and bust’. Coal had a future via CCS and he thought tidal was promising ‘around the country.’ As for energy efficiency -well he alluded to the Green Deal and the Smart Meter programme.

British Gas, which had posted profits of £742m last year, had just announced gas price rises of 18%. So the mood was very much one of looking at what it would all cost. Huhne said £110bn, but the EMR would reduce uncertainties for investors and protect consumers from the vagaries of the market, though he said that prices would have to rise- but by less than they would have without the EMR. Maybe 1% extra on bills by 2020.

The details

The Carbon Price Floor (CPF) will replace the Climate Change Levy, building on the existing EU Emissions Trading System. It will provide ‘a transparent and predictable carbon price which will make investment in low-carbon generation relatively more attractive, encouraging increasing amounts of investment as the carbon price rises and ensuring that the costs of carbon emissions are reflected fairly’.

The Contract for a Difference (CfD) system (which DECC still labels a Feed-In Tariff, though it’s not a guaranteed-price FiT), will provide ‘low-carbon electricity generators with increased confidence in their revenues through agreement of a long-term contract. If the wholesale electricity price is below the price agreed in the contract, the generator will receive a top-up payment to make up the difference. If the wholesale price is above the contract price, the generator pays the surplus back. This means that, as the CPF gradually increases the wholesale electricity price, the support needed for low-carbon generators is reduced.’ Crucially ‘to reflect the different commercial and operational behaviour among different classes of generation, the Government will tailor the design of the FiT CfD for different generation types’.

On the EMR consultation, DECC says that ‘the majority of respondents were sceptical about the use of auctions to set the level of support for low-carbon generation’ but notes that the government is still keen, though to ease the transition, it is ‘minded to move from administrative price discovery processes for low-carbon technologies to more competitive forms of price discovery such as auctions or tenders when the wider conditions in the market will support their successful deployment. In the medium term, technology-specific auctions or tenders for commercially deployable nuclear and CCS generation should be possible. The Government intends to introduce an auction or tender process for price-setting for specific technologies from 2017. Tariffs for generation that will be commissioned prior to 2020 are most likely to be set through an administrative price setting process’.

There’s a new consultation on the design of the Capacity Mechanism- to protect security of supply by maintaining a plant margin. It could be targeted, with payments ‘to secure only the amount of generation capacity required to make up the expected shortfall in the market’, as a strategic reserve, or via a capacity market, with perhaps CfD interactions. Storage, Demand Side Management and interconnector options might play roles.

Finally there’s the Emission Performance standard, which is seen as the regulatory ‘decarbonisation’ driver for the market, ‘complimenting’ the CPF. Quite a package.


In parallel with the EMR, DECC’s new UK Renewables Roadmap sets out a ‘comprehensive action plan to accelerate the UK’s deployment and use of renewable energy, and put us on the path to achieve our 2020 target, while driving down the cost of renewable energy over time’. It identifies eight technologies that have ‘either the greatest potential to help the UK meet the 2020 target in a cost-effective and sustainable way, or offer great potential for the decades that follow’.
These technologies are:
• onshore wind
• offshore wind
• marine energy
• biomass electricity
• biomass heat
• ground source heat pumps
• air source heat pumps
• renewable transport

DECC says that ‘of particular importance is offshore wind – of which we have abundant natural resource and already the world’s largest market. Our intention is to maintain this position, ensuring the full economic and energy security benefits of our offshore wind resources come to the UK rather than go to our competitors’.

Clearly then, publicly at least, DECC is not taking that much notice of the Committee on Climate Change which recommended a cut back on offshore wind since it was deemed to be expensive. Indeed it says 18GW is possible by 2020, up from 13GW in previous plans.

The Ministerial Preface to the DECC report says ‘The UK Government will respond to this advice by the end of the year; this response, alongside the Annual Energy Statement and policies to meet the 4th Carbon Budget, will place renewables firmly within the energy mix’. In the meantime DECC notes the decision to ‘provide up to £30m of direct Government support for offshore wind cost reduction over the next 4 years’.

While approximately 90% of the generation necessary to meet the 15% 2020 energy target can be delivered from its chosen subset of 8 technologies, it says ‘the remaining renewable energy generation necessary to meet the 2020 target will come from technologies such as hydropower, solar PV, and deep geothermal heat and power. These will generally qualify for renewable financial incentives and will benefit from action to unblock cross-cutting non-financial barriers, including those set out in the recent Microgeneration Strategy for England. Microgeneration technologies will also benefit from the Government’s commitment to Zero Carbon Homes’. Note the lowly position of solar.

The report then reviews the potentials for the eight selected technologies, including cost estimates, and outlines a range of actions designed to help progress their development, e.g. using the Renewables Heat Incentive. DECC will produce an annual updated edition of the Roadmap

I’ll review reactions to the EMR package in next week’s Blog.

Posted in Renew your energy | Tagged | Leave a comment | Permalink
View all posts by this author  | View this author's profile