Industrial chimneys

UK closing in on EU 2020 deadline

The UK continues to pursue its 2020 target for the use of renewable energy, but how is it faring, and indeed is a legally binding framework the most cost-effective strategy?

Climate change is emotive and controversial, and polarises opinion more than almost any other scientific subject. But unlike most other scientific topics it will affect everyone's day-to-day life, whether directly, through changing weather patterns, or indirectly, through increased use of renewable fuel for electricity production and transport fuel.

To prevent the most severe impacts of climate change, evidence shows that the world needs to limit global warming to no more than 2°C above the pre-industrial temperature. That is just 1.2°C above today's level.

To stay within this ceiling we have to halt the rising trend in global greenhouse gas emissions before 2020, at least halve global emissions by the middle of this century, and continue cutting them thereafter.

For its part, two years ago the EU adopted a wide-ranging package on climate change after months of tough negotiations in the 27-nation bloc. The package focuses on three areas: emissions cuts, renewables and energy efficiency.

Changes have been made to the original package unveiled by the European Commission in January 2008, to address European industrialists' concerns about green measures potentially making them uncompetitive at a time of weak global demand.

But the overall '20-20-20' targets have been kept: a 20 per cent cut in emissions of greenhouse gases by 2020, compared with 1990 levels; a 20 per cent increase in the share of renewables in the energy mix; and a 20 per cent cut in energy consumption.

The UK's proposed target is 15 per cent by 2020, because it is far behind many other EU countries in the area of renewables. The commission says the EU must embrace renewables not only to slow climate change, but also because the EU's reliance on imported gas is set to increase from 57 per cent to 84 per cent by 2030, and on imported oil from 82 per cent to 93 per cent. The creation of new jobs in renewable energy technologies is another strategic benefit, the commission argues.

Aside from the regulatory and political imperative, the UK government is keen to stress the economic benefits of renewables.

Investing in renewables

Late last year the coalition government reaffirmed its commitment to meeting EU renewable energy targets, and the UK published an update on progress to source 15 per cent of all energy from renewable sources by 2020.

Research from the Department of Energy and Climate Change (DECC) shows that so far this financial year, companies have announced plans for almost £2.5bn of investment in UK renewable energy projects, with the potential to create almost 12,000 jobs.

But with the 2020 deadline only eight years away there is a pressing need for the UK to step up its renewables output. In its report to the EU Commission at the end of 2011, government reported that it had achieved a 27 per cent increase in renewable energy consumption from 42.6TWh in 2008 to 54TWh in 2010 –' representing 3.3 per cent of total energy consumed.

The UK increased wind generation by 46 per cent between 2008 and 2010, from 7TWh to 10.2TWh, and in 2010 achieved 5GW of offshore and onshore wind capacity. On the transport front, the UK witnessed a threefold increase in the use of biofuels in transport from 1 per cent of total road transport fuel supply in 2007/08 to 3.33 per cent in 2010.

"Renewable energy is not just helping us increase our energy security and reduce our emissions," Energy Secretary Chris Huhne said at the report's launch. "It is supporting jobs and growth across the country, and giving traditional industrial heartlands the opportunity to thrive again. Our renewable target is less demanding than other EU member states, but the effect is bringing real jobs and investment.

"I do not want the UK to be left behind by turning our back on the green economy. The agreement to negotiate a global deal secured at Durban has reinforced major nations' commitment to cutting carbon. We cannot afford to stand alone while the world wises up."

Elin Twigge, account director at green sector lobbyists PLMR, is heartened to hear that the proportion of the UK's total energy consumption from renewables has increased. But she feels that in order to stand a real chance of meeting the 15 per cent renewables target by 2020, much more needs to be done to increase renewables deployment over the next decade.

"As acknowledged in DECC's first renewables progress report to the European Commission, significant measures must be taken to extend renewable energy generation and to continue to reduce carbon emissions," she says. "DEFRA's proposal for tougher recycling targets to help divert 400,000t of packaging from landfill by 2017 is a step in the right direction.

"In light of the Chancellor's disappointing Autumn Statement for the green sector – which supported just one renewable project, alongside a host of coal and gas-fired developments – all eyes are on the government to take clearer and stronger action in 2012 to match our consumer habits with responsible energy policy."

Challenging target

"The 2020 renewables target is very challenging and will require a dramatic increase in deployment rates," Gaynor Hartnell, chief executive of REA, says. "We currently have no target beyond 2020, and that is a problem in itself, as the European Commission has recently acknowledged."

Despite the government's optimism, Hartnell feels that it is unlikely that the target will be achieved at the current rate. "Sadly this has been the case with all renewable energy targets to date in the UK," she says. "Whenever it becomes clear that a target will be missed, it will be superseded by a bigger target, further off into the future."

A focus on actually reaching targets, however near-term, is therefore very important.

The 2020 targets have not been universally popular but Adam Bell of Renewable UK feels that they are the only way to provide a solid foundation for investment.

"Legally binding targets are a very useful way of providing certainty to investors looking to put money into capital intensive projects – like most renewables," he explains. "Those investing in renewable energy need to have the confidence that the policy frameworks put in place by the government will be robust enough to provide a secure long-term rate of return. An obligation on the government to deliver such frameworks, which the targets represent, is helpful."

But one thing is apparent; targets alone achieve nothing. They have to be coupled with effective policies, implemented carefully. "We actually quite like the Renewable Energy Directive target, precisely because it does not break down the overall target into component technology," Hartnell says. "The 10 per cent transport requirement is an exception ' but we can live with this, because it is particularly challenging to decarbonise transport and a start needs to be made sooner rather than later."

The European Commission encourages member states to have technology specific targets, but the REA supports the government in not seeking to do this. "One area where we don't share the government's view on targets is its agnostic approach to picking winners between the low-carbon options of CCS, nuclear and renewables," Hartnell continues. "We feel that renewables have unique and undeniable advantages over the other two options, in that renewables cannot run out of fuel or storage facilities for wastes, for none are required. We think that renewables, therefore, should be prioritised over other low-carbon options."

The main crux is that the government thinks that we are on track. It forecasts growth from 3.3 per cent of primary energy from renewables in 2010, to 5.4 per cent in 2015. "In order to achieve the much steeper growth rates in the latter half of the decade to get us to 15 per cent, the government must build market confidence now," Hartnell says.

Lagging behind

At present, the UK ranks third from bottom out of 27 EU member states in terms of percentage penetration of renewables and we are at rather a low point in terms of investor confidence. However, Hartnell points to the fact that the UK has never engaged in retrospective policy change like has occurred elsewhere in Europe.

"Introducing tariff reductions with six weeks' notice may feel like changing the ground rules – but government is adamant that once an installation has commissioned and has begun earning a particular tariff, then the tariff will never be reduced," she says. "We welcome the fact that this is a line in the sand that the government will not cross."

With the 2020 deadline approaching speed is of the essence, and if the anticipated acceleration of deployment for renewables is to take, there needs to be some concrete action. The REA believes that the priority should be to bring some stability into the Feed-in Tariff, to clarify the new EMR (Electricity Market Reform) arrangements as soon as possible, and to set out a realistic timetable for the Renewable Heat Incentive.

However, probably even more pressing is clear guidance on the transport targets. "Long overdue is the development of a trajectory for meeting the 10 per cent transport target," Hartnell concludes. "Government must seek to rebuild investor confidence, and these measures will help. The sentiment is certainly there. Ministers talk of TLC – transparency, longevity and certainty – and that's what the members need."

While there are an array of technologies that need to develop if the targets are to be achieved – onshore wind, offshore wind, solar, wave/tidal and biomass – some technologies certainly seem to be more cosseted than others. Offshore wind in particular seems to have its needs catered for with more care. "Onshore wind and biomass plants are encountering difficulties securing planning consent," Bell adds. The delivery of these technologies, and offshore wind, is dependent, in some cases, on upgraded grid infrastructure.

Looking for an alternative

Not everyone agrees that binding targets are the way forward. The need to achieve targets with an eight-year span is forcing incentives and research focus into the more mature areas of wind and PV. There is little doubt that these offer the best opportunity to reach the targets, but the question remains are they the most cost-effective long-term solution?

"The UK and its EU partners have spent two decades attempting to put in place a global agreement to reduce greenhouse gas emissions, with a headline aim of limiting the increase in mean global temperature to no more than 2°C relative to pre-industrial levels," Dr Boaz Moselle, senior managing director of FTI Consulting, an economic and financial consulting firm and author of a report published last year by the influential thinktank Policy Exchange. "Unfortunately, as of today these efforts have met with failure, and the prospects of success appear increasingly slender."

The most recent predictions from the International Energy Agency (IEA) show that even if governments follow through with the unilateral commitments they made at the 2009 Copenhagen Climate Conference, the global temperature will still rise by 3.5°C in the long term.

The EU based its 20/20 targets on the desire to take a leadership role on climate change, but Moselle argues that this policy has proven to be flawed given that no other major world player wished to take on such a role. "It is now time to develop a 'Plan B' climate policy," Moselle says.

"Despite the poor outlook for a short- or medium-term global solution, the EU should continue to promote mitigation at the global level, retaining its own 2020 emissions reduction target, and its high level of ambition on longer-term decarbonisation. However, there are questions about the proposal currently under discussion at EU level, and supported by the UK government, to increase the 2020 target from 20 per cent to 30 per cent.

"It has a cost currently estimated at £27bn per year. Its impact on the global level of emissions would be minor (as of 2020 the difference would be roughly equivalent to two weeks of China's CO2 emissions)."

The argument is that the adoption of a 30 per cent emissions reduction target for 2020 is not fundamental to achieving global climate mitigation. If the EU's 2020 package is reopened and the emissions target increased, then, as part of that, the EU 2020 renewable energy target should be scrapped (or downgraded to an ambition), enabling greater emissions reduction at lower costs.

Moselle argues that European policy-makers should instead focus on an alternative approach that, in the long run, is likely to prove more effective: promoting technological advances that will promote greater emissions reduction at global level, by lowering the costs of the most important technologies for global mitigation. A significant reduction in the cost of mitigation could do much to reduce opposition and induce meaningful action. Achieving such a reduction requires a much greater focus on innovation, which will be a win-win situation to the UK economy and the governments. *

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