Renewable Energy in the UK – an overview

Gaynor HartnellChief Executive

Renewable Energy Association

The sole responsibility for the content of this presentation lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

Overview of talk• Housekeeping arrangements

– Lunch– Briefing materials– Attendance sheet – please sign

• A word about the REA• Progress in UK, in context of EU27• Overview of key electricity and heat financial

instruments• Overview of Electricity Market Reform• The European Commission Proposals on Indirect Land

Use Change – Clare Wenner

What is the REA?• UK trade association for all renewables

We are unique, in that:• Over 1100 members and rising• Members of all sizes – sole traders to multinationals, with

one member one vote• Cover heat, power, transport and biomethane to grid• Members active across all renewables technologies• Activities include lobbying and policy development,

information dissemination to stakeholders and the wider community

Renewable Energy Directive2009/28/EC

• Sets the EU a target of 20% contribution from renewables to energy consumption by 2020

• UK’s target is 15% from a starting point of 1.3% in 2005

• Every country has a 10% target for renewable contribution to transport fuels

Malta

Luxembourg

Belgium

The Cze

ch Rep

ublic

Cyprus

Hungary

The Neth

erlan

ds

The Slova

k Rep

ublic

Poland

United K

ingdom

Bulgaria

Irelan

dIta

ly

German

y

Greece

Spain

France

Lithuan

ia

Romania

Estonia

Slovenia

Denmark

Portugal

Austria

Finland

Latvia

Sweden

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

20202005 United

Kingdom

National targets under the EU's Renewable Energy Directive

2004 2006 2008 2010 2012 2014 2016 2018 2020 20220%

2%

4%

6%

8%

10%

12%

14%

16%

1.3%

4.0%

5.4%

7.5%

10.2%

15.0%

Renewables directive: UK interim and 2020 deployment targets

Latest DUKES data: 2007: 1.8%2008: 2.4%2009: 3.0%2010: 3.2%2011: 3.8%

DECC’s indicative 2020 mix, published 2009

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200

20

40

60

80

100

120

UK renewable electricity production and NREAP indicative 'targets'

UK NREAP indicative targetsHydropowerTidal and WaveSolar PVLandfill GasElectricity from wasteBiomass electricityOffshore WindOnshore wind

Elec

trici

ty p

rodu

ctio

n (T

Wh)

8.7%

30%

Main contributors:-Onshore and offshore windBiomass, (conversion and co-fir-ing)Solar

Renewables Obligation (RO) • Began in 2002, will close to new entrants in 2017• The main driver for renewable power deployment• A cross between a quota system and a premium FIT –

consequently very complex• Suppliers have an obligation to source a certain amount of

Renewable Obligation Certificates (ROCs)• Different technologies earn different number ROCs/MWh• Provides an incentive for suppliers to enter into Power

Purchase Agreements• The impending loss of this incentive is a worry…. (and there

is no priority access in the UK)

EMR – a few buzzwords• EMR = electricity “market reform”• CfDs = Feed-in tariffs with contracts for

difference• Capacity Mechanism• Carbon Floor Price • LCF = the Levy Control Framework• Delivery plan• Allocation process• Auctions

EMR – what it means for RE• CfDs will replace the RO• CfDs available from 2014 onwards• Initially CfD “strike” prices will be administered• Intention is to move to technology specific auctions, then

have all low carbon technologies competing together• £7.6bn spend allowed under Levy Control Framework in

2020 (covers FITs, CfDs for nuclear, CCS and renewables, and demand reduction measure TBD)

• Intention is that this spend is sufficient to achieve 30% renewables

• The small-scale FIT will continue (and maximum size threshold may be raised under the Energy Bill)

Strike price

Reference price

Time

Inco

me

The Government’s objective is that the generator earns this much for their power sales….

…And this much from the CfD

In total both income streams should equal the strike price, and give the generator a stable, bankable income stream

How CfDs should work

Small-Scale Feed-In Tariffs (FIT)• Introduced in 2010• For wind, AD, PV and hydro projects up to 5MW• Roller coaster, with rapid uptake in PV, where tariffs

were too high• The budget was exceeded, tariffs were reduced

rapidly and there were legal challenges• Tariffs are now subject to capacity-triggered

degression• Minimum energy efficiency requirement introduced• Deployment slowed although returns still attractive

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

UK renewable heat production and indicative 'targets' from the UK National Renewable Energy Action Plan

UK NREAP indicative targetsHeat PumpsGeothermal aquifersMunicipal solid wastePlant BiomassAnaerobic DigestionAnimal BiomassWood combustion - industrialWood combustion - domestic Sewage sludge digestion Landfill gas Active solar heating

Hea

t pro

duct

ion

(TW

h)

12%

2.2%

The Renewable Heat Incentive• Unique in Europe• Effectively a “Feed In Tariff” for heat• Phased introduction

– Nov. 2011 first batch technologies, non domestic– Summer 2013, second batch of technologies, and

householders• So far uptake slow (many of the first were legacy

projects)• Tariff degression mechanism to be introduced• Teething issues on metering, accreditation –to be

expected

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200

10,000

20,000

30,000

40,000

50,000

60,000

UK transport biofuels and indicative 'targets' from the UK National Renewable Energy Action Plan

NREAP biofuels

Biodiesel

Bioethanol/ bio-ETBE

Bio

fuel

s us

ed a

s tra

nspo

rt fu

els

(GW

h)

Road Transport Fuels Obligation targets:2008/09: 2.5% by volume (2.18% by energy)2009/10: 3.25% (2.8% by energy)2010/11: 3.5% (achieved 3.11%)2011/12: 4.0% (3.31% by energy)2012/13: 4.5% (3.72% by energy)2013/14: 5.0% (4.14% by energy)

2.9%

10%

Barriers - Uncertainty • Overall lack of clarity on policy direction,

particularly over renewable transport and EMR

• Uncertainty over RO support levels• Departmental tensions evident

• Post 2020 no special treatment

• Evidenced by investment slow down

Barriers - Planning• From cascading down of regional targets to

Localism• Refusal appeal win = resentment• Targets not imposed, up to local communities,

within context of NPPF, i.e. a “bottom up” approach

• A focus on incentives = contentment• Retention of business rates• More emphasis on community involvement

Barriers - Planning• UK average wind consent rates under 50MW projects are around

65% (by scheme) 62% (by MW) • Average time

for decisionfallen from 15.5mto 14m.

• Localism Act, 2011• New NPPF, 2012• New Minister, 2012• This suggests that the above has not had detrimental impact that it

could have had, although the unpredictability and costs of planning are still unwelcome, from the project developers’ perspective

Where you can help – Targets post 2020

– a decarbonisation without renewable energy targets option, relying on the carbon market and a revised ETS

– continuation of the current regime, with binding renewable energy, emissions reductions and energy efficiency targets, or

– an enhanced, more harmonised management of our whole energy sector with an EU renewable energy target

Where you can help continued...

• Support UK approach to how to define End of Waste, as this will not undermine UK’s Biofertiliser Certification Scheme

• Support UK stance on maintaining lower VAT rate on energy efficiency and micro-renewables equipment

• Your support for our ILUC recommendations

THANK YOU!ghartnell@r-e-a.net