Renewable Energy in the UK – an overview

Gaynor Hartnell Chief 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 Directive 2009/28/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

50% 45% 15% 10% 5% 0% 40% 35% 30% 25% 20% National targets under the EU's Renewable Energy Directive 2020 2005 United Kingdom

Renewables directive: UK interim and 2020 deployment targets 16% 14% 12% 10% 8% 6% 4% 2% 0% 2004 1,3% 2006 Latest DUKES data: 2007: 1.8% 2008: 2.4% 2009: 3.0% 2010: 3.2% 2011: 3.8% 2008 2010 4,0% 2012 5,4% 2014 2016 7,5% 2018 10,2% 15,0% 2020 2022

DECC’s indicative 2020 mix, published 2009

120 100 80 UK renewable electricity production and NREAP indicative 'targets' 30% UK NREAP indicative targets Hydropower Tidal and Wave Solar PV Landfill Gas Electricity from waste Biomass electricity Offshore Wind Onshore wind 60 40 8.7% 20 Main contributors: Onshore and offshore wind Biomass, (conversion and co-firing) Solar 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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)

How CfDs should work

Strike price …And this much from the CfD The Government’s objective is that the generator earns this much for their power sales….

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

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

80,0 70,0 60,0 50,0 40,0 UK renewable heat production and indicative 'targets' from the UK National Renewable Energy Action Plan UK NREAP indicative targets Heat Pumps Geothermal aquifers Municipal solid waste Plant Biomass Anaerobic Digestion Animal Biomass Wood combustion - industrial Wood combustion - domestic Sewage sludge digestion Landfill gas Active solar heating 12% 30,0 20,0 10,0 2.2% 0,0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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

60 000 50 000 40 000 UK transport biofuels and indicative 'targets' from the UK National Renewable Energy Action Plan 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) NREAP biofuels Biodiesel Bioethanol/ bio-ETBE

10% 30 000 20 000 2.9% 10 000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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 decision fallen from 15.5m

to 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!

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