UK Renewable Energy PolicyTed Hayden Strategy & Policy Advisor, Office For Renewable Energy Deployment

6 June 2013 1

Agenda

• Department of Energy & Climate Change• Our carbon and renewables targets• UK Renewable Energy Policy• Office for Renewable Energy Deployment (ORED)• Priority activities• Support measures• Progress & Benefits• Emerging issues and opportunities

The Department of Energy & Climate Change (DECC) works to make sure the UK has secure, clean, affordable energy supplies and promote international action to mitigate climate change.

•Energy security •Action on climate change •Renewable energy •Affordability •Protect the most vulnerable and fuel poor households•Ensure competitiveness for energy intensive industries•Supporting growth

DECC Responsibilities

The legal framework

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Ambitious binding targets

•The Climate Change Act set a target to reduce emissions by at least 80% by 2050 relative to 1990 levels and by at least 34% by 2020

•The EU Renewable Energy Directive requires the UK to meet 15% of energy demand from renewable sources by 2020 (from 3.8% in 2011)

Accountability

•Publish policies and proposals on how we will meet our carbon budgets and report annually on progress

•Set up the independent Committee on Climate Change (CCC)

Making it happen

•The UK has some of the best wind, wave and tidal resources in Europe .

•All major renewable energy technologies are supported and are seen as a key component of the future low-carbon mix.

The Public are Supportive

•8 in 10 people support the use of renewable energy to generate electricity

•Solar power had the highest backing (82%), followed by offshore wind (72%) and wave and tidal (71%). Onshore wind was opposed by 13% of respondents.

UK Renewable Energy

• Renewable Energy Targets

• In 2009 The Government published its Renewable Energy Strategy and set up the Office for Renewable Energy Deployment (ORED) to drive forward renewable energy in the UK.

• ORED addresses deployment issues by working alongside central Government Departments, local and regional authorities, stakeholders and other NGOs.

• Every year the government publishes the UK Renewable Energy Roadmap.

Office for Renewable Energy Deployment (ORED)

Office for Renewable Energy Deployment

Enabling cost effective delivery of renewable energy as a core part of the UK’s low carbon energy future

Increasing deployment of

renewable energy to 2020

Ensuring renewable energy is embedded

as part of the Government's

energy strategy up to 2050

Driving down the cost of renewable

energy and ensuring value for money for

consumers

Delivering jobs and investment within the

UK from renewable energy projects

Ensuring public understanding and

acceptance of renewable energy

deployment

We have a 15% renewable energy target as set by the European Union.

The UK must secure a factor of ten increase in renewable energy up to 2020, compared with an average factor of two increase across Europe – all while increasing demand.

Sources: ORED (2013)

There are many renewable technologies, with very different costs and potential. Only a subset are ‘critical’ for meeting a target of 15% renewable energy by 2020

The EU defines ‘renewables’ widely, as “energy from renewable non-fossil sources.We can use any of these to meet a target of 15% of energy use in 2020, equal to 220 – 230 TWh of

generation. But the following eight technologies will be most important.

Much theoretical potential but must

ensure sustainability.

8. Renewable Transport In 2020: < 44TWh/yr

Sources: Definition from EU, Directive 2009/28/EC; TWh figures from DECC(2011 and 2012), Renewables Roadmap

Three policies are paid for by energy suppliers, who pass costs onto consumers.

Achieving these aims relies on five main policies for driving renewable deployment

Contracts for Difference (CfDs)

Renewables Obligation (RO)

Feed-in tariffs (FITs) scheme

Renewable Heat Incentive (RHI)

Supports heat generation from things like biomass boilers or heat pumps via a tariff paid proportionate to generation.

All figures are p.a. Source: DECC(2013), DECC policy and economists * figure refers to real 2012 prices. RO figures consistent with govt. response to RO Banding Review consultation, July 2012

Renewable Transport Fuel Obligation (RTFO)

DfT regulation requiring fuel suppliers to include biofuel in transport fuel.

• Currently main policy for supporting large scale renewable electricity deployment

• New bands from 1 April 2014

• Closes to new generation in 2017

• Contracts for Difference will take over as our main source of support for large scale electricity generation projects

• Between 2014 and 2017, new renewable energy projects will be able to make a one-off choice between the two mechanisms

Renewables Obligation

Feed-in tariffs

• Greater certainty for industry and generators and reduced impact on consumer bills

• Over 400,000 PV tariff reductions maximum quarterly, depending on take-up

• Details on www.ofgem.gov.uk

• Over 400,000 installations by January 2013

• Comprehensive review completed during 2012

• Greater visibility, long term stable cashflows, indexed to inflation• For renewables, 15 year fixed revenue contracts paid for energy

produced• CCS and nuclear projects also eligible

• New long-term contracts for capacity, minded to let first contracts from 2014

• Gas generation eligible

• Long-term certainty of the cost of carbon in the UK • Starts April 2013

• Not just for new nuclear• Transitional CfDs for some renewable and CCS projects• For projects seeking to achieve financial close or make major supply

chain commitments this year

Contract for Difference (CfD)

Capacity Market

Carbon Price Floor

Early Delivery

Electricity Market Reform

Renewable Energy in the UK: Historic and Projected, 2007 - 2020

Because of the low starting point, deployment needs to be steep.

Sources: DECC(2012), Renewables Roadmap; indicative contribution based on possible sharing of burden as set out in HMG(2009), Renewable Energy Strategy

Indicative contribution: demand needed from renewables in 2020Indicative contribution: demand needed from renewables in 2020

Of the three sectors making up our 2020 goal:Renewable electricity has made a good start.Heat and transport are have challenges

Of the three sectors making up our 2020 goal:Renewable electricity has made a good start.Heat and transport are have challenges

Renewable electricity generation increased from 9.4% in 2011 to 12.5% by the end of 2012.

A 250% growth in capacity since 2007

N.B. for the purpose of comparison, 10MW is roughly equal to five onshore wind turbines, or two offshore turbines

A strong forward pipeline

(MW) Under Construction

Awaiting Construction

Pre-Consent

Biomass 254 2970 831

Offshore Wind

1538 2017 7292

Onshore Wind

2294 4456 6774

Waste 339 1003 175

April: Britain’s largest rooftop solar installation (>20,000 panels) fitted onto Bentley factory in Crewe

7th March: London Array officially became world’s largest operational offshore wind farm. Final completion due later this spring

30th Jan: new 35-turbine ‘Westermost Rough’ windfarm off river Humber, worth ~ £860m. Enough for annual power of > 200,000 homes

Sample of recent major announcements

Source: Pipeline data from REPD (January 2013). Investment figures from developer announcements.

The growth in renewables is bringing other advantages. Government has two main further goals of maximising economic benefit while minimising cost

We have a very positive story to tell already, with jobs created UK-

wide

Since 2010 DECC has recorded investments in

large scale renewable energy totalling over £29

billion, with the potential to support around 30,000 jobs.

Job figures based on ORED analysis of developer announcements

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Impact on energy prices and bills

• Energy Security• Nuclear and Unconventional Gas• Green Deal rollout

• Energy Security• Nuclear and Unconventional Gas• Green Deal rollout

The next few months and years present both challenges and opportunities

• Onshore wind• Joint Projects?• Transition to EMR• Deal support and investor confidence• Strategic clarifications and additions• Cost reduction• Heat and transport• Bioenergy sustainability

• Onshore wind• Joint Projects?• Transition to EMR• Deal support and investor confidence• Strategic clarifications and additions• Cost reduction• Heat and transport• Bioenergy sustainability

Website:https://www.gov.uk/government/organisations/department-of-energy-climate-change

Contact:ted.hayden@decc.gsi.gov.uk

Follow:@deccgovukwww.youtube.com/deccgovuk

Department for Energy and Climate Change

6 June 2013