REA MANIFESTO GROWING THE RENEWABLE ENERGY ECONOMY
RENEWABLE ENERGY ASSOCIATION
FUNDING
CONFIDENCE
SUPPOR
SUSTAINA
EUROP
INFORMING
GREEN
CHA
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SYSTEMS
RENEWABLES MEMBERS
EARTH
COST
ELECTRICITY
SECTOR
RECYCLING
SUPPLY
ORGANICS PROJECTS
RESOURCES
EMPOWERING
BUSINESS
YEARS
CHANGES
TIME
NOW
ASSOCIATION
CHANGES
ECONOMY
TRANSPORT
SUPPORT
DEAL UK
SECURITY
ECOLOGY
COMMERCIAL
TECHNOLOGIES
POWER
MEMBERS
26/08/2014 10:46
PoWER
MEMbERs
funDinG
ConfiDEnCE
ElECtRiCitY
suPPoRt
sustAinAblE
EuRoPE
infoRMinG
GREEn REnEWAblEs
EnERGY
ChAMPioninG Gni
inDustRY
sYstEMs
MEMbERs
PoliCY
Cost
RECYClinG
sECtoR
oRGAniCs PRojECts
suPPlY
EMPoWERinG
REsouRCEs
EARth
businEss
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ChAnGEs
EConoMY
AssoCiAtion
DEAl uK
tRAnsPoRt
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tiME
GREEn GAs
sECuRitY
hEAt
suPPoRt CoMMERCiAl
tEChnoloGiEs
AltERnAtiVE
EnViRonMEnt EnViRonMEnt CREDibilitY CREDibilitY
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Contents Foreword 4 Introduction
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RENEWABLE HEAT
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Heat Pumps
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Biomass Heat
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Solar Thermal
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Waste 14 WASTE TO ENERGY
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Biogas 18 RENEWABLE Power
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BIOMASS POWER
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Solar Power
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DEEP Geothermal
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Marine energy
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Renewable Transport
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ENERGY STORAGE & GRID NETWORK
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FINANCE 32 COMMUNITY ENERGY
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POLICY OVERVIEW
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FOREWORD The UK currently gets 5% of its energy from a renewables industry that supports over 100,000 jobs and has secured over £30 billion of private investment since 2010. By 2020, we need to double the share of renewable electricity, more than double the share of renewable transport fuels, and more than quadruple the share of renewable heat to meet legally binding targets of 15% of our energy to come from renewable sources. Achieving these targets would require at least a further £65 billion of investment and could grow the industry to support 400,000 jobs. The next year is a crucial year for the UK’s energy infrastructure, further laying the foundations for the energy market we will have by 2030. Yet, many of us in the industry, as well as in parliament, already have a clear idea of what 2030 should look like. What we are fighting for is how we can get there in the most cost-effective and transparent way. The renewables industry needs a policy framework that will deliver long-term investor certainty and stable growth, and just as importantly, value for money and cost reductions as we gradually move towards a world without subsidy. Policy certainty was the highest priority amongst REA members when consulted for this manifesto, reducing the risks when developing technologies and projects, as well as the costs for financing and increasing economies of scale. By 2030, we know that the way we generate our electricity is going to have to be considerably lower carbon. We have to stop burning coal, which generates 40% of our electricity today and is the single worst polluting fuel we use. Eventually we must also move away from gas (recognising its transitional role) – the current situation leaves us at the mercy of both global pricing and foreign governments.
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We know that the way we heat our houses, businesses and industry will have to be different, as well as reducing wasted energy from those buildings and processes. Heating accounts for 50% of both our energy use and associated emissions and yet only 3% of our heating is renewable. With heating costs having increased by 40% since 2010, 4.3 million people living in fuel poverty and 4 million off the gas grid, we need a revolution in how we keep warm. As well as dedicated renewable solutions like wood heat and heat pumps, we can also be smarter with the heat left over from power generation, using combined heat and power (CHP) to feed district heating schemes connecting thousands of homes. We know the way we fuel our journeys has to change too. We need to wean ourselves off polluting, expensive, imported fossil fuels. 25% of the UK’s total carbon emissions come from domestic transport. We have made some progress sustainable biofuels used in the UK currently achieve 70% greenhouse gas savings compared with fossil fuels. Yet there is more we can be doing today to expand the share of conventional biofuels and spur innovation in advanced biofuels. In future, electric vehicles may have a key role to play once the proportion of our electricity supply is truly high-renewables and low-carbon, but advanced fuels made from wastes can play a crucial role in future proofing areas of transport than cannot move to electricity, such as biomethane for freight and jet biodiesel in aviation. We know we must use organic resources much more effectively, minimising the amount we waste and recycling our leftovers to make green farming products, like compost and biofertiliser, and green energy, via anaerobic digestion, energy-from-waste plants and advanced conversion
technologies. The next Government will have to set out their vision on how the UK is going to get on track for both existing 2020 targets and future 2030 targets for emissions and recycling. We need ambitious targets coupled with robust national plans setting out how we will achieve them. This industry can deliver. More and more technologies are approaching competitiveness with fossil fuels, enabling us to move towards a new energy paradigm, one which has already begun in many countries. Combining grid-competitive renewable electricity with effective energy storage will spark a revolution in the energy system that truly enables homes and communities to fully take back control and become more independent from centralised energy suppliers. We need a government that is looking forward to the energy industry we want, not one looking to preserve the antiquated status quo. Our industry is ready to face these challenges and realise the opportunities. Whoever wins in 2015, we will work with them to realise a clean energy vision.
Dr Nina Skorupska Chief Executive, REA
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INTRODUCTION The Renewable Energy Association is the UK’s largest renewable energy trade body, covering renewable power, heat, transport and organics recycling, representing nearly a thousand businesses. This represents the real business needs of the renewables industry. The sector “asks” have come from the bottom up, with members ranging from the sole trader to multinationals all contributing. We have consulted with our individual technology groups, and far from settle on the lowest common denominator, we have thrashed out real, deliverable and honest asks that we believe will help move the UK to a cost-effective, secure and low carbon energy future. In energy policy, there is no silver bullet, but all renewable technologies certainly have a part to play. From better utilising our sun, sea, wind and land, to ensuring we move away from our unsustainable throw away culture, creating a more circular and integrated economy. Renewable energy is already a major business sector in the UK with clean energy one of the fastest growing industries in the world. The UK has seized the momentum in some areas, such as technology development for wave and tidal stream and securing investment in wind and solar power. We also have the world’s first Renewable Heat Incentive. Yet in some areas, the UK is actively u-turning, such as sustainable biofuels, onshore wind, biomass power, large scale solar and renewables in new homes. In other areas, such as geothermal, biogas, biomass heat, heat pumps and solar thermal, the UK has barely begun to scratch the surface of these technologies’ phenomenal potential. This document examines the progress and policy asks across our core technology groupings of heat, transport and power. We also explore several themes that cut across multiple sectors, from waste and recycling to community energy, from finance to energy storage. There are also cross-cutting issues which affect the whole industry. REA is pleased to have been one of the trade associations representing renewable technologies who have come together under the banner of ‘Action For Renewables’ to develop key policy asks for the next government and present a united industry voice.
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action for renewables
RENEWABLE ENERGY ASSOCIATION
INDUSTRY ASKS 1 Support the Climate Change Act to keep us on course to meet our carbon commitments and back global efforts to tackle climate change 2 Set a new renewables target for 2030 of 30 per cent of UK energy 3 Back the independent Committee on Climate Change’s recommendation to set a binding target for low and no carbon electricity by 2030 4 Fund the Renewable Heat Incentive for new applications after 2016 5 Boost the UK’s Renewable Transport Fuel Obligation to reach the 10 per cent renewable energy target for transport by 2020 6 Reform the EU emissions trading scheme to ensure the market takes account of all sectors’ polluting cost of carbon emissions
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Renewable Heat LOW CARBON, HAS LOWER FUEL COSTS AND PUTS PEOPLE BACK IN CONTROL Renewable heat - from sunshine, heat pumps, hot rocks, biomass and biogas - offers homes and businesses home-grown low carbon alternatives to polluting and increasingly expensive fossil fuels. Most of these technologies can heat air or water and some can be used in industrial applications such as kilns. As with all heating appliances, they work best in buildings and systems with high energy efficiency standards. The UK needs to do much more to improve our existing housing stock, as well as new builds, to ensure keeping warm is as affordable and efficient as possible. Heat is half the challenge - You don’t hear or read half as much about renewable heat as you do about wind or solar farms, but it is every bit as important for meeting our renewables and climate change targets and for reducing our dependence on fossil fuel imports. Although the 2020 projection for renewable heat is lower than renewable electricity (12% v 30%), the required rate of growth is actually higher than renewable electricity or transport because it comes from a lower base. We need to get from 1% in 2010 to 12% in 2020 - a 1200% increase. We’re up to 3% now but there’s still a long way to go. 47% of all UK energy is used for heating, which is responsible for a third of the UK’s carbon emissions. Most of this is from gas, which accounts for 80% of the average household energy use, equating to 55% of the average household energy bill. With domestic gas reserves in decline, the UK has become a net importer over the last decade, with over 50% imported in 2013, exposing us to the fluctuating international market and the price spikes that come with energy supply shocks. The change we need - The UK needs to change the way we heat our homes and businesses. We need to reduce our reliance on markets out of our control and reduce the carbon emissions for half of our energy use. Heating bills have increased by 40% since 2010, and there are nearly four million homes living off the gas grid having to rely on more expensive ways of heating their homes, such as electricity,
oil and Liquefied Natural Gas (LNG). Renewable heating lowers ongoing fuel costs, provides energy independence, as well as helping to reduce the UK’s carbon emissions (especially when displacing the more carbon intensive fuels used in off-grid areas). In 2007 the then government pledged that by 2016 all new homes would need to be “zero carbon”, thus providing industry with a clear target and timetable. However, since then there has been a systematic watering down of the approach, with the most recent proposals representing only a one third reduction of energy use in- and carbon emitted from- the home itself. The opportunity to future proof our new homes is enormous, preventing a need to upgrade standards by retrofit later on. New homes are currently excluded from receiving the Renewable Heat Incentive (RHI), so incentivising renewable heating in new homes through Building Regulations is the obvious way to go. The Renewable Heat Incentive - launched in 2011 following a political campaign led by the REA and Friends of the Earth, the RHI is the main tool for delivering the UK heat strategy. New tariffs and technologies were introduced in spring 2014, as well as support for individual households. As with all heating systems, upfront costs can be prohibitive. Just as inefficient boilers have had government assistance to upgrade, the RHI makes it affordable for households and businesses to move to low-carbon heating with fuel savings and RHI payments helping the system achieve financial payback. We need to ensure that support is appropriate and the policy framework ensures cost effectiveness for the taxpayer, whilst still being attractive for the industry and consumers. The RHI budget, currently only set out to 2016, needs setting out to 2020 to give the young renewable heat sector the policy certainty it needs to plan for the future. The sector also needs sustained policy support beyond 2020, as emphasised recently by the Committee on Climate Change. This will ensure continued investment in skills development (an absolute must in a new industry) and the development of
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comprehensive supply chains. Combine this with measures to raise awareness and boost demand for the technologies, and this exciting industry will reach its potential in the near term and can become self-sustaining in the long term. Heat networks As well as individual installations serving single users, one installation can serve several users as part of a heat network. This makes most sense in an area where there is a concentration of users such as industrial sites or the centres of towns and cities. There are a number of examples of this in the UK, although heat networks are more widespread in several European countries. There are opportunities for dramatically improved fuel efficiency
by generating both heat and power - with lower heating costs and greenhouse gas emissions as a result. Fossil or renewable fuels can be used. Heat networks are naturally more complex to develop than individual installations, so they tend to take some time to be developed, usually building outwards from a central core. In towns and cities, local government will play a key role. DECC has set up a delivery unit to help projects at early stages, but there is clearly a greater role for the public sector in helping networks fulfil their potential - not least in the longer-term approach required to fund infrastructure projects with long lifetimes. Greater incentives to encourage new developments to connect to local heat networks would also be needed.
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Heat pumps HEATING FROM NATURAL SOURCES Heat pumps extract heat from a natural source (air, ground or water) and concentrate it to obtain a higher temperature. This gathered heat is usually then applied to water for space heating. The device which does this can be thought of as a refrigerator operating in reverse. It is powered by electricity, but the amount of heat energy delivered is several times more than the electrical energy consumed. The ratio of output to input energy is called the Coefficient of Performance (COP), with air source heat pumps achieving heat outputs of roughly 2.5 times the electrical input and ground source 3-3.5 the electrical input. Heat pumps can be more efficient than traditional heating systems, provided they are coupled with larger radiators or under floor heating. A good standard of building insulation is also essential. Heat pumps are ‘fit and forget’ technologies, meaning there’s no need for fuel deliveries and only minimal maintenance requirements.
Manifesto asks • Give industry post-2016 certainty Maintain and expand the RHI to at least 2020, confirming budgets from 2016-2020 • Future-proof new buildings - Focus on on-site solutions by ensuring carbon compliance standards in building regulations promote integrated heating solutions to protect new housing from future retrofitting • Focus on efficiency - The RHI needs a better mechanism to promote more efficient heat pump systems. Currently there is a fear in the industry that less efficient cheaper systems are indirectly favoured, which could cause customer dissatisfaction in the medium to long term
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bioMAss hEAt thE ChEAPEst souRCE of on-DEMAnD loW CARbon hEAtinG the Rhi has been an excellent catalyst for uK businesses and individuals alike to learn about the benefits of renewable heat and the technologies available today. however, with a commitment for new applications only to March 2016 there is a large amount of short term thinking occurring throughout the industry which will have a negative impact on the long term development of renewable heat. the Rhi policy itself, while a welcome boost to the uK industry, also needs some alteration taking in the lessons learnt over the last few years. Areas requiring immediate attention are the impacts of rapid degression of the most successful technologies to date and whether the individual technology budgets promote or hinder the deployment of renewable heating solutions throughout the uK.
Manifesto asks biomass heat is one of the most efficient and cost-effective modern energy sources, with the costs of the fuel already cheaper than mains gas for many homes throughout the uK, as well as being significantly cheaper than traditional off-gas grid heating solutions (i.e. electric heating, oil and lnG). biomass heat uses sustainable forestry resource, typically certified wood pellets and chips. biomass has huge undeveloped potential, which could be realised if existing government policy is improved. the uK targets for 2020 are challenging, and need to be achieved in the most cost efficient way. biomass has so far delivered 95% of installations under the Rhi, and is forecast to contribute 60% of overall renewable heat energy by 2020. this will require a 75% per annum growth of the biomass heat sector every year, which given Rhi policy certainty to 2020 is easily achievable by industry. Consequently, the renewable heat sector needs all political parties to indicate clearly how the Rhi scheme will deliver that post 2016.
• Give industry post-2016 certainty - Maintain and expand the RHI to at least 2020, confirming budgets and minimum tariffs for technologies from 2016-2020 • rHi effectiveness - Review the banding structure to ensure cost-effectiveness • Protect projects with long lead times - Provide sufficient tariff certainty for projects with long lead times (e.g. large biomass heat and CHP) • Ensure the RHI reaches the industrial sector Introduce support for heat delivered directly via air, such as kilns • Heat networks are a UK infrastructure priority Introduce framework and incentives to build crucial district heating
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Solar thermal BEST COST REDUCTION POTENTIAL OF ANY LOW CARBON HEATING TECHNOLOGY Solar thermal systems are a simple and well-proven technology for producing low-carbon heat. Globally solar thermal capacity is double the capacity of solar power, illustrating how firmly established this technology is. The UK market is dominated by domestic water heating, but solar thermal also has huge potential for commercial heating, space heating and even industrial processes where it can deliver temperatures over 200 degrees centigrade. The relative immaturity of the UK market means that the potential for solar thermal applications has yet to be appreciated. The greatest non-financial barrier for solar thermal in the UK is poor awareness and understanding of the technology’s applications. Many European markets are much more developed and boast diverse uses of solar thermal, such as for air-conditioning, heat storage and district heating. Demand for hot water is fairly constant year round, which means that there is a significant demand for hot water when solar energy is at its peak in the summer months. Solar thermal systems can provide most of the hot water during this period, as well as making a useful contribution in winter months. Typically, in the UK, solar water heating is most economic when used to heat water for baths, showers, hand washing and other domestic hot water requirements. Even in Northern climates solar thermal can provide 50-70% of hot water needs over the year. The market is broadly split into flat plate collectors, which are relatively cheap and give good performance for lower temperature applications, and evacuated tube collectors, which can achieve higher temperatures. The retrofit solar thermal market in the UK suffered as a result of extensive delays to the introduction of the domestic RHI while solar power flourished under the Feed-in Tariff. However, the domestic RHI is now in place and is offering good support, sensibly based on occupancy. There is concern though that the Government’s Zero Carbon Homes agenda has been watered down, as solar thermal is an excellent technology to incorporate in new build
developments. The Solar Trade Association (STA) has calculated that installing 200,000 systems per annum would reduce unit costs by a third, making solar thermal highly affordable. Solar thermal is supported in industrial applications up to 200kW in size, and this should be extended in recognition that the technology is very effective at heating swimming pools and has been used in industry, in hotels and on farms.
Manifesto asks • Expand the solar ambition - Extend RHI support for solar thermal to:
• PVT combined panels
• Space heating
• Swimming pools
• Future-proof new build - Focus on on-site solutions by ensuring carbon compliance standards in building regulations that promote integrated heating solutions to protect new housing from future retrofitting • Promote renewable heat - Educate and promote the domestic use of solar thermal under the RHI to the public
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Waste THE DOWNFALL OF LANDFILL AND THE RISE OF WASTE-BASED ENERGY, FUEL AND FERTILISER Waste not want not
No more wasted food
The UK produces in excess of 600 million tonnes of waste annually. Historically this material has either been landfilled or incinerated with only a small amount of energy recovery taking place, although in recent years this has changed dramatically. The UK now recycles 45% of its waste. This material is a valued resource that comes from a wide variety of sources including commercial, industrial and household collections. Separating waste streams by source and type is vital for maximising their value for recycling and energy recovery.
Up to 50% of recycled waste is biodegradable in nature, yet as a nation we are doing nowhere near enough to realise its potential for producing sustainable compost, fertiliser and energy.
Smarter not harder As a country, we need to be smarter about how we use our waste. We have to do more to reduce, reuse and recycle, but when that is exhausted we will still have a resource left over that should be utilised as effectively as possible. Landfill and incineration (without energy recovery), are wasteful and environmentally unsustainable. So too is shipping our waste to other countries for them to utilise, which is common practice at present. The various organics recycling and waste to energy technologies - from compost and biogas to combustion and advanced conversion - are undergoing huge technical advances, enabling us to realise the value in our waste, reduce our emissions and improve our energy and resource security.
Composting and anaerobic digestion (AD) are two key technologies in organics recycling, which can turn food waste and farm slurry into compost and fertiliser. AD also produces biogas, which can generate electricity under Feed-in Tariff (FIT) or the Renewables Obligation (RO), whilst the RHI supports both on-site heat generation and the injection of upgraded biogas (biomethane or ‘green gas’) into the gas grid so we can use it to heat our buildings or fuel vehicles or industrial processes. Woodier lignin-based materials, such as garden waste and plant material from the maintenance of soft landscapes and green spaces, is by far the highest volume of material collected, amounting to 5.2 million tonnes PA. This is largely being composted and used as a soil conditioner, mainly in agriculture, but also in retail and soft landscaping. Compost and biofertiliser are increasingly recognised as having a valued role to play in replacing unsustainable soil improvers and growing media, such as artificial fertilisers and peat. Using our organic resources sensibly, as part of an integrated circular economy, will bring benefits to our energy supply, the rural economy and the environment.
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Waste to Energy Huge potential for turning waste into a valuable resource Waste to energy covers a range of technologies and feedstocks, from combustion with energy recovery and the collection of methane from landfill sites, to anaerobic digestion of organic wastes (covered separately under ‘Biogas’), enzymatic treatment solutions and advanced thermal treatment (ATT) technologies, such as gasification and pyrolysis (G&P). Many waste to energy technologies avoid harmful methane emissions from landfilling waste, while generating energy and useful by-products such as construction materials and for some technologies, biochar. Much of the UK’s waste is also exported at present, and this process therefore utilises an increasingly valuable UK resource otherwise lost to UK plc while avoiding the associated transport emissions.
Renewable Energy and Landfill Directives.
These technologies are key long term solutions for reducing landfill and increasing the supply of low-carbon electricity and heat. They can also help the UK meet its targets under the EU
The efficiency of waste to energy solutions can be significantly increased with the implementation of heat networks. Financing these heat networks as part of a wider infrastructure
The UK currently lags behind most other EU countries when it comes to realising the clean energy potential in its residual waste streams, but an improved policy framework could see a much greater contribution from the various waste to energy technologies. More needs to be done to promote the reduction, reusing and recycling of waste, but there will always be an element left over. Energy recovery is a key part in the waste hierarchy. Without it, this material would be destined for landfill or simple incineration (i.e. without also generating energy).
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development remains a significant challenge and addressing this should be a priority for the UK.
Manifesto asks
Some technologies, for example gasification & pyrolysis, can provide an efficient way of converting a range of biogenic feedstocks into fuels and chemicals too. The technologies also offer wider advantages for UK plc as we are currently a leader in the R&D and manufacturing of the technology. The two main G&P technologies are:
• Support for waste to energy - Ensure waste to energy technologies can continue to contribute to UK renewable power deployment under EMR
Gasification - A process in which biomass or waste is heated in a vessel to produce a gas (syngas) that can then be used to produce electricity, chemicals or fuels.
for projects applying for CfDs in order to support this emerging technology
Pyrolysis - A process in which biomass or waste is heated in a vessel to form char, gas and/or liquid that can be used to produce electricity or fuels.
• Heat networks as UK infrastructure - Government funding for CHP infrastructure • Appropriate support for ATTs/G&P - Reserve capacity
• Joined up thinking - Ensure a more strategic approach to commercial & industrial waste so that it is available for energy generation • Better regulation - Ensure waste and permitting regulations are consistently enforced • RDF exports - Monitor the situation and respond accordingly, supporting technologies such as gasification and pyrolysis and markets such as heat offtakers is vital as is ensuring that valuable RDF remains available for energy production in the UK, within the context of a free market across the EU
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Biogas RENEWABLE FERTILISER FOR FARMING AND BIOGAS FOR HEATING, ELECTRICITY AND TRANSPORT Anaerobic Digestion (AD) is a natural process where plant and animal materials are broken down by micro-organisms in an airtight tank, or digester. This releases a methane-rich biogas that can be used to generate renewable heat, power or transport fuel. Biogas can also be upgraded to grid quality gas and injected into the national gas network, where it can be used for heating or as a transport fuel. It also produces a valuable biofertiliser which can displace expensive mineral fertilisers whilst improving the soil. An REA subsidiary - Renewable Energy Assurance Limited - runs certification schemes assuring the quality of biofertiliser and compost and its Green Gas Certification Scheme tracks biomethane through the supply chain to enable its direct purchase by end-users of the gas grid. Biogas is one of the most versatile energy solutions the UK has at its disposal. AD is a perfect example of how renewables can fit into, and improve already existing processes. There is a longstanding government ambition for 1000 on-farm AD plants by 2020, reducing greenhouse gas emissions by digesting their slurries and agricultural residues. AD strikes to the heart of how we should be modelling our future energy use, making the most of our resources cost-effectively, deploying them locally, and ensuring that being far from onerous, they complement AD operators day-to-day processes. AD is thriving at the large scale, especially plants handling food wastes, but the current drastic tariff reductions are bringing the medium- to small- part of the market to a halt. This situation has to be rectified quickly if the full potential for emissions savings
and growth in the rural economy is to be realised. It is also in this sector that a number of innovative British companies have developed, creating jobs and helping farmers to run economically and environmentally sustainable businesses and grow the rural economy.
Manifesto asks • Commitment to AD - All scales form a vital part of reaching renewable targets and need policy certainty for the differing sizes and outputs under the support frameworks such as FITs, RO, RHI, RTFO and CfDs • Clear direction for agriculture - Support for farm manure/slurry model of AD • Remove unintended consequences - Review of Feed-in Tariffs for small AD in 2015 to correct flaws in the current cost control mechanism and reset tariffs to suitable levels • Landfill ban on organic waste - Ban on landfilling of biodegradable waste to landfill, as already introduced in Scotland and Wales • Support biomethane - Removal of final technical barriers to biomethane injection
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Renewable power HOME-GROWN, LOW CARBON, DEMOCRATISING ELECTRICITY SOURCES The UK electricity system is at a crossroads. It is the single biggest part of the UK infrastructure plan, because decades of under-investment means that new generating capacity needs to be built now to keep the lights on this decade. At the same time, we realise that we cannot just do more of the same. Our dependence on fossil fuels is not just damaging our climate, it is also leaving us exposed to volatility in international energy markets, which has been the number one cause of rising energy bills over the past decade. Reducing our dependence - Renewable power, from water, wind and wastes, from sunshine, hot rocks and biomass - ticks a lot of boxes. It is all low carbon, it is mostly home-grown, and when we do need to import renewable fuel, we import it from trusted trade partners in Europe and the USA. Renewable power also doesn’t produce any waste, and decommissioning costs are minimal. Increasing growth, reducing costs - We have seen excellent growth in renewable power in recent years, up to 15% of the whole electricity mix. This growth must continue to meet renewable energy and emissions reduction targets. At the same time, however,
we are aware of the need to minimise the costs of renewable energy policies. This means maximising the cheapest renewable power technologies first, whilst continuing to stimulate innovation and cost reductions in younger technologies. More pragmatism, less politics - There are four technologies that can make a major additional contribution today: biomass, onshore wind, solar power and conventional waste to energy. These technologies all have three things in common: they are low cost, they can build quickly to bridge the looming capacity gap, yet they are all being squeezed out of the market. Onshore wind and solar are suffering a political backlash driven more by the elements of the press rather than the electorate, biomass policy has gone into reverse due to misplaced sustainability concerns, and we’re sending millions of tonnes of waste overseas instead of using it to generate our own clean energy. We need secure, affordable renewable energy and the next Government must ensure the policy and budgetary framework delivers this in a cost-effective and pragmatic way. Equally, targeted policy interventions are needed to secure investment and innovation in the technologies of the future, such as marine renewables, deep geothermal and advanced waste conversion.
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Transforming the market - The true magic of renewable power is that it is largely decentralised. This means more energy can be used locally by households, communities and businesses, which is more efficient than transmitting electricity over great distances. Plus, with the right policies, more energy could actually be owned locally too, revolutionising the traditional suppliercustomer model. To realise the full potential of a high-renewables power supply, Government must provide policies to support grid reinforcement, energy storage and local energy ownership.
Biomass power A LOW-COST, LOW-CARBON DROP-IN FOR COAL TO BRIDGE THE URGENT CAPACITY GAP The need for cost effective, low carbon, reliable and flexible generation is going to be key for the UK energy mix to 2020 and beyond. Combined with the need for large scale generation to replace coal fired power stations with securely sourced fuels to keep the lights on, biomass meets many of the challenges policy makers face.
Biomass is also one of the most cost-effective sources of low carbon power, but needs long term policy certainty for investment in the infrastructure that is supporting the wider biomass industry, as well for developers to access finance to build plants or convert existing coal stations. Research by DECC shows that including biomass power in the energy mix would reduce the costs of decarbonising our energy system by £44 billion to 2050. There is currently support for some conversion of existing coal plant to burn biomass, although the funding available falls far short of the potential. There are also no plans in the medium or long term to support new standalone power stations. Nor has this been to the benefit of more efficient combined heat and power stations. The combination of the general policy uncertainty and government gold-plating of EU Directives means these projects have also been badly undermined. This is particularly short-sighted as the more use we can make of sustainable biomass the less we will have to rely on fossil fuels to balance the grid. Manifesto asks
Biomass power can come from a variety of options:
• Support biomass conversion - Provide sufficient CfD budget to allow sustainable biomass to play its full role in cost-effectively meeting our 2020 targets
• Wood such as residues, thinnings and forestry by-products, sourced from sustainably managed forests.
• Support new dedicated capacity - Allow standalone biomass to take part in the CfD mechanism
• Energy crops such as miscanthus and short rotation forestry.
• Reduce EU goldplating - Support CHP by relaxing the UK’s interpretation of the EU Energy Efficiency Directive in line with other EU states
• Agricultural residues such as straw. For UK generators to qualify for Government support their fuel must meet specified standards. The UK Government’s ‘Sustainability Criteria’ require an independently verified minimum 60% greenhouse gas saving (compared to the EU fossil fuel grid average) across the whole biomass supply chain - including harvesting, processing, storing and transport. This means that biomass must always demonstrate a significant emissions saving compared to fossil fuels.
• Robust standards - The UK Government should encourage the development of robust sustainability standards • Policy certainty - Grandfather sustainability rules, ensuring developers can seek finance without the hostage to fortune of retrospective changes
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Solar power SOLAR’S COSTS ARE FALLING FASTER THAN ANY OTHER ENERGY TECHNOLOGY Solar power, or photovoltaics (PV), converts sunlight directly into electricity. Solar power is the UK’s most popular energy source, with 85% public support according to DECC. The solar power industry sprang into life in the UK with the start of the Feed-in Tariff in 2010, secured following a campaign led by the REA with Friends of the Earth. There are now over half a million homes in the UK benefiting from solar power. 16,000 people are employed in the UK’s solar industry across more than 2,000 companies, most of which are SMEs. The start of the domestic solar power industry coincided with massive international investment in solar power manufacturing which, together with domestic investment in efficient installation, led to major cost reductions. At the large scale, solar power became competitive with other renewables two years ago and this has led to the expansion of solar farms. The Solar Trade Association and National Solar Centre have published clear guidance to ensure that developers focus on solar farm quality, including sensitive siting, visual screening, and compatibility with food production. Further guidance on using solar farms to support biodiversity was published this spring in association with leading UK conservation groups. The cost-effective rooftop market for commercial and industrial buildings has notably failed to take off in the UK, despite some high profile schemes. It is essential to address policy barriers in this sector if the Government is to fulfil the vision set out in its Solar Strategy. Solar power is an exceptionally democratising technology that can work at all scales and opens up the electricity sector to very wide and diverse ownership. Despite preconceptions about the UK’s weather, solar could readily supply around a third of UK electricity demand from south-facing roofs and facades alone. It has an annual generation profile that is compatible with wind power, and the benefits of engineering the two technologies together has been a key lesson of the German ‘Energiewende’
(energy transition). There is also strong interest across the industry in energy storage, to allow power collected from solar panels to be used to more closely match demand, including when it’s dark. The UK solar power industry is keen to continue its unprecedented rate of cost reduction and to be subsidy free by the end of the decade. To achieve this, the Government must provide a coherent policy framework for all sub-sectors of solar power.
Manifesto asks • Roadmap to grid parity - Develop a clear pathway to parity with grid and retail electricity prices for all sub-sectors of solar power • Ensure cost effectiveness - Level the playing field for solar power and keep the RO open for large-scale developments until 2017 • Allow SMEs to participate in Contracts for Difference - Changes required include quarterly auctioning, guarantees that there will be at least a minimum level of funding available for each technology and a secure route-to-market for all SMEs • Support mid-range technologies - Correct barriers in the FIT scheme and address the nonfinancial barriers under the Feed-in Tariff scheme to unlock growth in the cost-effective mid to large scale rooftop market • Future proof new build - Focus on on-site solutions by ensuring carbon compliance standards in building regulations that promote cost-effective incorporation of solar in new build
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Falling subsidy for large scale solar in this parliament - cost (ÂŁ\MWh) 23
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Deep geothermal VERY LOW CARBON ON-DEMAND HEATING AND POWER GENERATION Geothermal technology uses the heat energy found in the Earth’s crust to provide very low carbon heating and power. Installations can last for 100 years and have very small surface footprints. Geothermal is non-intermittent and can produce ‘dispatchable’ power. Efforts to exploit the UK’s geothermal resources have really ramped up in the last few years, reflecting the successful
experience of other EU countries. For instance, Paris has 35 geothermal stations supplying heat to tens of thousands of households (and Orly airport) while Germany has rolled out a fleet of geothermal heat and power plants. Italy is the oldest geothermal power producer in Europe, with an electricity generating capacity of around 900 MW.
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World geothermal installations
The UK’s geothermal resource is widely distributed with ‘hotspots’ in Cornwall, Cheshire, the North East, Weardale, Hampshire, Northern Ireland and Scotland. UK companies plan to develop heat-only plants in Manchester and the North East, and to exploit the ‘hot rock’ potential below Cornwall to generate up to 3GW of electricity. The introduction of the RHI has made deep geothermal heat projects commercially attractive, with some close to breaking ground. Tackling a few remaining non-financial barriers (such as the lack of a licensing scheme) should see the roll out of this exciting technology in the UK during the next Parliament. Deep geothermal heat plants range in size from just a few MW to over 50MW. They are ideally sized to supply heat networks serving many hundreds or even thousands of homes with low carbon, competitively priced heat. These heat customers will benefit from long term price stability, in contrast to the continuing price volatility of fossil fuels. Despite only having one plant (in Southampton, currently being refurbished), the UK has an extensive skills base in deep geothermal and related sectors, such as drilling and hydrogeology. We are thus well placed to take advantage of
rapidly growing geothermal markets globally. Alongside rapid expansion in the US and across Asia, World Bank funding is driving GW scale geothermal power projects in highly promising future markets, such as Kenya and Ethiopia.
Manifesto asks • Better licensing regime - The introduction of a comprehensive deep geothermal licensing system once the sector has proved a demonstrator plant • Support heat networks - A policy framework, including funding, to drive the roll out of district heat networks - the perfect complementary infrastructure for deep geothermal • Support exploration - Introduce a risk insurance scheme for the geothermal industry in the UK • Support commercialisation - Support for more demonstrator projects to increase our understanding of the UK’s deep geothermal resources
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Marine energy WITH 40% OF EUROPEAN MARINE ENERGY RESOURCE, WE MUST CONSERVE OUR GLOBAL LEAD Developing marine renewable energy technologies, comprising wave, tidal stream and tidal range, is an area where Britain leads the world, with the leading projects, engineers, technology and construction. We are already exporting our designs and expertise across the world, but if progress domestically stalls, we risk handing away our advantage just as we did with onshore wind technology in the 1970s. Marine is a massive untapped resource in the UK. Europe holds 20-30% of global wave and tidal resources, 40% of which is located in and around the coastlines of the UK. Estimates suggest that, if fully exploited, wave and tidal power could supply at least 15-20% of the UK’s electricity. Marine technology in the UK is still at the pre-commercialisation stage, and whilst there are projects currently deployed and
generating electricity, growth has been held back by uncertainty regarding future support from central Government. In order to attract investment, the industry needs confidence that the current levels of financial support will be maintained in the longer term. This will facilitate innovation, expansion and economies of scale, which will all drive down costs. Close collaboration with Government will enable development of the skills, infrastructure and technology base to ensure that the UK remains at the global forefront of this burgeoning technology. Wave power The power of the waves is readily visible on nearly every ocean shore in the world. Much research has gone into developing technologies to harness the energy of the waves and transform it into electricity. However, further support for R&D in generation
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technologies, focusing on the most promising devices, is needed to bring them to the point where they are acquired by major industrials and commercialised. The Crown Estate estimates that c£100m of public funding over 5 years is necessary to ensure that the first array projects are taken forward. Wave energy technologies fall broadly into three categories: - Machines which channel waves into constricted chambers. As the waves flow in and out of the chamber, they force air in and out of the chamber. These airflows are in turn channelled through a specialised turbine, which is used to drive a generator. This type of machine is principally designed for use on or near the shore, or for incorporation into breakwaters. This kind of machine is particularly advantageous when incorporated into coastal protection. - Fixed or semi-fixed machines which utilise the pressure differential in the water that occurs at a submerged point as the wave passes over that point. The pressure differential is used by a variety of means to cause a fluid to flow in a circuit, which is then used to drive a turbine and generator. - Machines which utilise their buoyancy to cause movement in a part of the device as it responds to the waves. The movement is used either directly or indirectly to drive a generator. Tidal stream It is possible to extract power from the tidal flow that occurs between headlands and islands or in and out of estuaries. This application is the focus of much research and development, with new products for this purpose now being commercialised. These “in-flow” tidal turbines can be arranged individually or in arrays, allowing a range of power outputs to be produced. Tidal stream technologies have recently attracted support from original equipment manufacturers (OEMs) but to enable several projects to be constructed and start operating, additional capital grants for first array projects and commercial funding (equity
and debt) from Government agencies must be made available. The Crown Estate estimates that £50m in capital grants is required for the next 5 years. Tidal range In areas where there is a high tidal range, a barrage with turbines may be built across an estuary or a bay. As the tide falls and rises, it creates a height differential between the inner and outer walls of the barrage. Water can then flow through the turbines and drive generators. Some tidal barrages, particularly estuarine barrages, are designed to operate purely on the falling tide, but others operate on both the rising and falling tide. A recent variation on this theme has seen proposals for tidal lagoons in areas of high tidal range, which operate on a similar principle with turbines built into the lagoon walls. Manifesto asks • Better grid regulation - Facilitate access to grid connection, since the UK’s marine energy resource is concentrated in remote locations • Support public/private ventures - Greater collaboration from Government with the private sector over funding to achieve commercialisation and standardisation • Industry certainty - Policy certainty over future revenue support to encourage investment • Joined up Government - Cross Government departmental support to achieve the industrial and environmental potential for the UK • Encourage Green Investment Bank to develop bespoke project financing offer for sector Building on experience of Scottish Enterprise and the Crown Estate • Support towards commercialisation - Establish appropriate capital grant scheme for next 5 years
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Renewable transport FOOD AND FUEL FROM FARMS AND WASTES TO CUT CARBON AND BOOST AIR QUALITY
Renewable fuels can provide an improvement in air quality and a reduction in carbon emissions immediately without the need for extensive new fuelling infrastructure or vehicle conversions, and at minimal cost (about ÂŁ9.00 per year according to the DfT) to the consumer. The most common forms are:
Biomethane - can be used in gas engine vehicles, either direct from a biogas fuelling station or indirectly from the gas grid using the Green Gas Certification Scheme. It is upgraded biogas from anaerobic digestion or thermal processing of food waste, farm slurries and energy crops.
Bioethanol - can be blended into petrol. It is made from starch-based biomass feedstocks - usually from sugar cane, wheat, maize and sugar beet and increasingly from municipal solid waste and agricultural residues.
Producing these fuels in the UK has additional benefits:
Biodiesel - can be blended into diesel. It is produced from oil-based feedstocks - traditionally oilseed rape, soy and increasingly waste streams such used cooking oil (UCO) and tallow. The UK market is mostly supplied by waste-derived biodiesel.
- Processing locally grown wheat into bioethanol produces equal weights of protein rich animal feed that replaces imported soy meal
- Providing investment and skilled jobs to the UK economy - Waste-derived fuels reduce landfill
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Carbon emissions from UK transport are still running at similar levels to 1990, whilst other sectors, such as industry, electricity and heat, have achieved substantial reductions. At 116 million tonnes of CO2, transport contributes 25% of the UK’s emissions today, up from 21% in 2012.
made for the Government’s consumer grants). Whilst a move to electrification is desirable, we should not think that electric vehicles will be the whole answer. The internal combustion engine will remain dominant for many years to come and we cannot sit on our hands waiting.
Whilst the automotive sector has made huge strides forward in engine efficiency during that time, there are now 37 million vehicles in the UK, a figure which has increased every year, barring 1991, and shows no sign of stopping.
There is an even bigger challenge ahead that the Government has just barely begun to address: sustainable air travel. This will always need liquid fuels. The private sector is already working on introducing low-carbon aviation fuel, but with the renewable fuel sector in both the EU and UK stalling, the UK is losing out on investment opportunities to both North and South America.
The Government acknowledges that “doing nothing is not an option”. The UK needs to move away urgently from fossil fuels, which contribute to climate change and impact on air quality. Whilst the UK has a stretching target of 10% for renewable energy in transport by 2020, the UK’s Renewable Transport Fuel Obligation (RTFO) is actually capped at 4.75% by volume (about 3.5% by energy), with the current Coalition Government having no plans to increase this during its term of office. Since the start of the RTFO in 2008, £1 billion has been invested in low carbon fuels by the private sector. These investments have generated 3,500 jobs, many of them in the highly skilled science and engineering sectors, helping to regenerate UK industrial heartlands such as Teesside, Humberside, the North West and Scotland. However, the cap on the RTFO is preventing the return on these investments from being realised. Electric vehicles - may have a key long-term role to play in decarbonising UK transport, but only a limited role in the near term. Fundamentally, electric vehicles are only as low carbon as the electricity going into them. Currently, only 15% of our electricity supply is renewable. A widespread roll-out of lowcarbon electric vehicles will require this share to increase dramatically, as well as a significant volume of additional generating capacity.
Manifesto asks • Achieve 2020 targets - An immediate increase in the UK’s RTFO target and a clear and urgent trajectory to reach the 10% renewable energy target for transport by 2020 • Government Roadmap - A plan for the contribution expected from:
- traditional low carbon liquid and gaseous fuels
- advanced low carbon liquid and gaseous fuels
- electrification
• Policy visibility beyond 2020 - Support for all renewable transport options in the Member State Action Plan required under the European Commission’s 2030 Climate Change package
Furthermore, it will take a lot of time and money to build the necessary infrastructure, design and build suitable vehicles and boost consumer demand (only 11,897 applications have been 29
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Energy storage & Grid Network THE KEY TO UNLEASHING THE POTENTIAL OF DECENTRALISED ENERGY Many forms of renewable electricity generation are variable or intermittent in their output. This is predictable to a degree. For example tidal energy is 100% predictable, whilst solar PV can only generate in daylight hours. Wind over the course of a year generally generates more in winter, which correlates with demand in a macro manner, but not on a day to day, hour to hour basis. Therefore, as the share of variable power generation grows, especially if it is complemented by nuclear power which is inherently inflexible, the system must cope with increasing
amounts of “wrong time� electricity. Electricity storage is an answer. It is not the only answer - more interconnection with other networks and demand side management also help. Nevertheless it is extremely important. Chancellor George Osborne has said the UK must take a global lead in energy storage. Many countries across the world are recognising the value of storage by introducing supportive policies, mandates or direct action to increase the number of storage projects and activities. There are many and varied ways of storing energy; some technologies are mechanical, using flywheels, compressed air
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or gravity; some are electro-chemical for example batteries and thermal energy can also be stored e.g. in heat stores. Electricity can also be stored in the form of gas; “wrong time” electricity can be electrolysed to produce hydrogen which could be stored or converted into synthetic natural gas and then stored. Whilst energy storage it is universally agreed to be a good idea, not a great deal is happening in the UK. There is no incentive to increase deployment, the Capacity Mechanism does little to help and there is nothing else in the Electricity Market Reform (EMR) package to assist. The Electricity Storage Network proposes that the UK power system should have a minimum of 2,000 MW of new networkconnected electricity storage by the year 2020. This represents just less than 10% of the predicted increase in renewable generation capacity over the same time period. The REA supports this proposal and will jointly work with Government, investors and developers to enable its important deployment. Grid network Any electricity generated must be transported to where it is used, and distributed renewable projects reduce the losses associated with this by generating it where it is used. However, most renewables projects must connect to the grid network in order to export their power and the cost of such connections is now the major barrier to many projects, which will worsen without action. The cost and time taken to connect projects varies significantly between locations (sometimes by seven figure sums and monthsworth of time) and create uncertainty.
Manifesto asks • Government vision - Develop a national strategy for energy storage that sets a target for 2000 MW of new electrical storage by 2020 • Develop EMR offer - Ensure market reform supports the deployment of electricity storage • Government partnerships - Continue support for UK demonstration and innovation projects • Strategic thinking on Grid - Ensure that there is strategic reinforcement of the UK grid network on a coherent basis based on future need, to avoid the current costly piecemeal reinforcements • Fairer funding - Ensure that necessary upgrades to the UK grid network are funded in an equitable and transparent manner by both the owners of the UK grid network (the ‘DNOs’) and renewable generators, to ensure the renewables projects we need to meet our targets can be built and connected • Grid competition - Take action to increase competition for connecting projects to the grid and use of the network
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Finance AFFORDABLE FINANCE WILL BOOST DEPLOYMENT AND REDUCE COSTS Both the availability and affordability of finance will be key enablers in delivering the UK’s 2020 renewable energy target. London is a world-leading financial centre so we are well placed to develop innovative financial products that will not only drive down the cost of capital to the renewables sector but also the cost of deployment and ultimately the cost of energy produced from renewable sources. PwC estimates that there has been £29.8 billion of investment in the renewables sector during the period 2010-2013, with most of the investment in renewable electricity (£27.7 billion). In the renewable electricity sector, investment has mainly been focused on wind, solar PV and biomass. In the renewable heat sector, there was an estimated £1.4 billion invested during 2010-2012. The majority of this investment (£0.8 billion) was in bioenergy technologies, which also saw the largest amount of added capacity. Of relevance too, solar thermal and heat pumps saw an estimated combined investment of £0.6 billion over the period, delivering 530MW of capacity. There has been comparatively little investment in renewable transport fuel production in recent years. During 2010 to 2013 PwC estimate that a total of £0.7 billion was invested in UK biorefineries.
Manifesto asks • Stable and transparent policies will attract a wider spectrum of investors thus improving competitiveness and driving down risk premium • Simplification of policies will incur lower upfront costs thus reducing the cost of finance • Clarity of key policies - the finance sector needs to know whether CFDs, RHI and FITs will be investable in the medium to longer term • A 2030 renewables target will help prevent a hiatus and ensure the finance sector continues to see the renewables sector as having a viable future • Reconsider the transition timetable from ROC’s to CfDs to avoid bottlenecking of projects in the run-up to March 2017 • Government to work closely with the finance sector to improve understanding and improve policy • Government departments to speak with one voice on renewables issues
For the period 2014 to 2020 PwC estimates that an additional £64.4 billion of investment will be required in both renewable electricity and heat to meet the UK’s 2020 target. Of this, £40.8 billion of investment will be required for renewable electricity. To attract this investment it is essential that the financial community is reassured that the renewable energy sector will continue to grow up to and beyond 2020. Above all else, policy stability and ambition must be at the heart of the new Government’s agenda.
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Capital investment in Renewable Energy 2010 - 2020 (ÂŁBn) 33
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Community Energy RESTORING POWER TO THE PEOPLE AND UNLOCKING PEOPLE POWER TO BOOST RENEWABLES There is great momentum behind the community energy movement. The REA is very supportive of communities seeking to take control over their energy futures and wants to do what it can to foster the sector - be it in power generation, heat, waste management, sustainable transport or energy efficiency initiatives. As well as communities developing their own renewables schemes, Government would like to see commercial projects being part-owned by communities. In January’s Community Energy Strategy, the Secretary of State for Energy & Climate Change Ed Davey stated that by 2015 he would like it to be the norm for interested communities to be offered the opportunity of some level of ownership of new, commercially-developed onshore renewables projects.
The voluntary approach is firmly favoured by both industry and Government. The REA, along with other trade bodies, community and industry representatives, participates in a Shared Ownership Taskforce, which published the draft voluntary framework in June. The recommendation is that: “Commercial project developers seeking to develop significant renewable energy projects (above £2.5 million in project costs) for the primary purpose of exporting energy onto a public network should offer local people the chance to invest alongside the developer.” The Taskforce’s recommendation is wider than the legislative approach, in that it encompasses heat generation and biomethane injection as well as wind, hydro and solar projects. Projects involving heat networks are also encouraged to make the offer. The REA hopes that heat as well as other energy networks can themselves become community-owned in future, as is starting to happen in Germany. However, the Taskforce agreed that heat networks in the UK are at too early a stage to warrant them having to consider shared ownership at this stage.
Manifesto asks • Support the voluntary approach - That Government gives the voluntary approach a fair chance to become established practice • Promote joint projects - That Government ensures shared ownership projects are catered for under the various renewable energy incentive schemes
To give this some focus, he went on to state that progress would be reviewed in 2015 “and if this is limited, we will consider requiring all developers to offer the opportunity of a shared ownership element to communities.” The enabling powers for legislation to make this mandatory are contained in the Infrastructure Bill.
• Empower local authorities - LAs need to play a key part in stimulating and participating in shared energy ownership and need to be included in Central Government plans
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Policy Overview Renewables Obligation (RO)
the policy aims to ensure that only useful heat is supported. The RHI opened in
The RO is the oldest of the current UK financial incentives, having started in 2002.
November 2011, initially only for ground source heat pumps, biomass, solar
It obliges electricity suppliers to source a proportion of their electricity from
thermal, small-scale biogas and injection of biomethane to the gas grid. Single
renewable sources. Renewables Obligation Certificates (ROCs) are awarded to
domestic installations were not included. To date, the scheme has been dominated
renewable generators, who then sell them to suppliers. Support lasts for 20 years,
by biomass boilers. Despite having a slow start, the policy is beginning to grow at
but the actual value of ROCs depends on the outcome of commercial negotiations
a faster rate. Major changes were consulted on in 2012/13 and were implemented
rather than being fixed by the policy. When introduced, all renewable electricity
in the first half of 2014. These included adding some tariffs and increasing others,
received the same level of subsidy, regardless of the technology used. This changed
with the highest profile change to be the inclusion of households in April and other
in 2009, when ‘banding’ was introduced - meaning that support varies depending
technologies in May. Unlike the renewable electricity policies - which are funded by
on the cost of the technology. The RO is due to close to new participants in 2017.
consumer bills - the RHI is paid for out of general taxation. The budget is fixed to
Electricity Market Reform (EMR)/Contracts for Difference (CfDs) EMR covers a package of measures including a carbon floor price, an emissions performance standard to rule out new coal generation and a capacity mechanism to try to ensure the system has sufficient back up capacity. Contracts for Difference are the new mechanism to replace the RO - although they will also be available for nuclear and carbon capture and storage. Most policies give a more or less fixed income to renewable generators but leave them free to sell the power itself on commercial terms. One drawback of this is that, if market prices go up then the total income for the generator will be higher than expected and they may be over-rewarded - and therefore the impact on consumer bills will be higher than it should be. By the same token, falling power prices would see generator income and consumer bills being lower than expected. CfDs will seek to address this by setting a figure for the total income for a project - i.e. both the renewables subsidy and the value of the electricity. This total figure is called the ‘strike price’. Concerns
the end of March 2016, with further funding to be set after the general election in May 2015. Renewable Transport Fuel Obligation (RTFO) The RTFO was introduced in April 2008. It is similar in principle to the RO, in that it obliges fuel suppliers to replace a proportion of supply with renewable fuels. Targets were scaled back in 2009. The Government has yet to set out a trajectory for meeting the binding 2020 targets contained in the Renewable Energy Directive, and has made this conditional on EU-level resolution of controversy over sustainability. This has undermined confidence in the sector - not only has future investment been scaled back but recent data show that even the reduced targets are not being met. This is particularly frustrating as UK-produced fuels have an excellent sustainability record, significantly exceeding expectations in environmental protection and greenhouse gas savings.
include how funding will be allocated and strike prices set, given that it is highly
Feed-in Tariff (FIT)
likely there will be far more applications for support than funding available, and
The FIT started in April 2010. It supports anaerobic digestion, wind, hydro and
ensuring that independent generators are fully able to take part.
solar PV up to 5MW, as well as small scale fossil CHP. There are also proposals to
In theory, this gives the best of both worlds, as the generator has certainty over total income and the subsidy - and therefore the impact on consumers - is no higher than necessary. The policy is due to be implemented by the end of 2014 and large areas of detail are still to be resolved. At the time of writing, it is not clear how successful this policy will be. Concerns include how funding will be allocated and strike prices set if there are more applications for support than funding available, and ensuring that independent generators are fully able to take part.
support community FIT projects up to 10MW in size. Building on successful policies elsewhere, the FIT aims to be much simpler for the end user than policies such as the RO. It pays a fixed income on all generation with no need to enter into complex commercial negotiations. The FIT also gives a guaranteed minimum income for electricity not used on site - although projects are free to seek better prices elsewhere. In 2011/12 solar PV was the major beneficiary, overshooting the estimated budget by a large margin. Cost control mechanisms have been introduced for both the FIT and the RHI for all technologies, in which tariffs reduce
Renewable Heat Incentive (RHI)
for new entrants to a scheme if deployment reaches particular levels. Although the
The RHI builds on a similar approach to the FIT, although is available at all scales.
PV market is more stable, tariff reductions for the other technologies happened for
Unlike electricity, excess heat generation cannot simply be exported onto a grid, so
the first time in 2014, and are causing severe market disruption.
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THE REA WOULD LIKE TO ACKNOWLEDGE THE FOLLOWING FOR
RENEWABLE ENERGY ASSOCIATION
SUPPORTING ITS VIEWS AND ASKS IN THIS MANIFESTO
TECHNOLOGY ASKS
THE REA IS PLEASED TO HAVE BEEN ONE OF THE TRADE BODIES WHO HAVE COME TOGETHER UNDER THE BANNER OF ACTION FOR RENEWABLES TO DEVELOP A COMMON SET OF INDUSTRY ASKS
action for renewables
RENEWABLE ENERGY ASSOCIATION
REA’s mission is to help our members build commercially and environmentally sustainable businesses and grow the renewable energy economy. Email: James Court - jcourt@r-e-a.net
Tel: 020 7925 3570
www.r-e-a.net
As part of our commitment to sustainable development, this Manifesto has been printed using vegetable based inks on 100% recycled paper sourced from managed forests as certified by the Forest Stewardship Council.
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