Wind turbine with a Union Flag twist

Does UK renewables uptake show permanent change?

A series of governmental reports signal the energetic uptake of renewables, but also highlights the UK's ongoing reliance on imported fossil-fuel energy.

From the dawn of the Industrial Revolution, the UK has relied heavily on fossil fuels for the bulk of its energy supply. Not much has progressed in the ensuing 250 years, but the winds of change are beginning to sweep through the UK energy sector. The spectre of climate change has heralded a new age of renewable energy, driven by government policies and keen financial incentives.

According to Energy Policies of IEA Countries, including The United Kingdom 2012 Review, the UK has defined a strategy to move to a low-carbon economy and to tackle climate change with a remarkable sense of coherence and commitment. However, it did sound a word of caution. "The UK consistently plays a constructive role in international climate policy, and its domestic policies enhance its credibility on the world stage," IEA executive director Maria van der Hoeven says. "For the UK to decarbonise its economy and energy system, however, huge private-sector investments in energy infrastructure are needed. Consumers must be certain that they are paying for the most cost-effective solutions. Enhanced co-operation with neighbouring countries will increase electricity security."

The electricity sector is a focus area of the decarbonisation efforts. The government has clearly indicated its intent to deploy three low-carbon technology pathways: renewable sources, nuclear power and carbon capture and storage (CCS). As part of its EU obligations, the UK must obtain 15 per cent of its final gross energy consumption from renewable energy sources by 2020, more than four times the share in 2010. Electricity is expected to contribute most to meeting this target, although the country has also introduced incentives for heat and obligations for transport fuels.

Low-carbon investment

A critical challenge faced by all IEA member countries is how to ensure continuing reliability of systems while promoting timely decarbonisation of electricity supplies. In the UK, around 12GW of coal and oil-fired capacity and 7GW of ageing nuclear power capacity are scheduled to close by the end of this decade. Combined, they account for a fifth of the country's total capacity. "Current policies may deliver an outcome that would fail to meet the UK's long-term climate policy targets, as new capacity is primarily gas-fired," van der Hoeven adds.

"An efficient mix of new, cleaner generation, more efficient use of existing infrastructure and more flexible demand will be needed." Ofgem, the energy-sector regulator, estimates that around '110bn needs to be invested in plants and networks.

"The UK is ahead of most in both recognising the low-carbon investment challenge and attempting to find concrete solutions," van der Hoeven adds. This is demonstrated by the level of ambition in the electricity market reform (EMR). The detailed plans are now being finalised and the government expects the primary legislation to be enacted in 2013.

The EMR comprises four policy instruments: a carbon price floor (CPF) to provide a transparent and predictable minimum carbon price for the medium- and long-term; a contract for difference feed-in tariff (FiT CfD) to provide low-carbon electricity generators with a guaranteed price throughout the period of the long-term contract; a capacity mechanism to ensure sufficient system flexibility is available to maintain reliable supplies, especially during peak periods, as the amount of variable and inflexible low-carbon generation increases; and an emissions performance standard (EPS) to limit how much carbon new power plants can emit per unit of electricity generated.

"The EMR proposes a transitional, targeted intervention to restructure the technology mix while simultaneously maintaining security of supply," van der Hoeven says. "In many respects it represents a fundamental departure from the market-based principles that have underpinned UK energy policy over the last two decades, reflecting concerns that market-based incentives may not be sufficient on their own to meet the government's electricity security and decarbonisation goals."

Promising renewables

Following hot on the heels of this report, the UK Department of Energy & Climate Change (DECC) released four key publications aimed at informing the industry and guiding energy policy towards its low-carbon future.

The Digest of UK Energy Statistics 2012, also known as the DUKES, provides an extensive overview of the state of UK energy consumption, demand and supply. The report highlights some promising rises in renewable energy production, as well as some less promising rises in the country's dependence on imported energy.

Primary energy consumption has seen a reduction of 6.9 per cent, following a year-on-year trend since 2006, good news for the UK's looming energy targets. Maintenance issues meant that this year primary energy production fell by 13.2 per cent, with gas and oil experiencing record falls. Warmer weather was a factor in a fall in energy consumption, with oil consumption decreasing by 2.4 per cent and a sharp decrease of residential gas usage leading to an 8 per cent decrease in carbon dioxide emissions in 2011.

Despite coal production being up by 0.4 per cent, 2011 was a promising year for renewable energy production with a 33 per cent rise in production, reinforcing the UK's migration towards greener sources of energy. It accounted for 9.4 per cent of total UK energy generation, an almost 7 per cent rise from 2010. Greener sources of energy, such as nuclear, also saw an 18 per cent rise in supply during 2011.

However, despite this positive stance on renewable energy generation, record levels of fossil-generated power is still being imported into the UK with a 3.8 per cent rise since 2010; the highest rise on record since 1974. Oil imported from Norway made up the bulk of our imports along with gas imported from Qatar and Norway, aviation fuel from Asia, and coal from Russia and Columbia, securing our place as a net importer of energy with a high dependency level of 36 per cent.

DECC also published an influential response to two energy licences that are frequently subject to scrutiny. The feed in tariff (FIT) scheme for non-PVs comes under review in the government's latest response, while DECC claim the renewable heating incentive (RHI) has finally been clarified for developers.

Financing energy

As of December 2012 (and for solar power, August 2012) FITs will change to reflect the UK's growing acceptance and dependency on renewable sources of energy. Tarrifs will be reduced over time for anaerobic digestion (AD), hydro and wind with a rise in uptake, while a new hydro band for 100-500kW installations will be introduced to encourage small-scale non-PV projects.

"It is not the government's policy to support renewables at any price," Lord Marland, Parliamentary Under-Secretary of State for the Department of Energy and Climate Change says. "Our ultimate aim is for renewables to become competitive without the need for subsidy. Today's package sends a strong signal to industry that we expect this to happen over time.

"The level of support for offshore wind will be set at 2 ROCs/MWh in 2014-15, reducing to 1.9 ROCs in 2015-16 and to 1.8 ROCs 2016-17. This is consistent with our consultation proposals, and reflects our expectation that the costs of offshore wind will fall as mass deployment takes place and industry innovates."

Pre-construction tariff guarantees will also be introduced for new projects over 50kW in size, meaning developers embarking on a project within a guaranteed timescale will secure tariff levels agreed during the initial stages of application.

"When thinking about small-scale renewables, it's important to remember that not all technologies under FITs are alike," Energy and Climate Change Minister Greg Barker says. "Some, like hydro schemes, have long lead-in times to get projects from the drawing board and into rivers. Projects over 50kW in size will be able to benefit from preliminary accreditation including a tariff guarantee, so investors can make decisions with confidence and be sure of their rate of return even before their projects are up and running."

In a move to consolidate the performance and budget of the renewable heating incentive (RHI), DECC is proposing the introduction of a digression-based system. The UK's RHI is the first of its kind in the world, drafted to provide long-term support for renewable heat technology such as heat pumps, biomass boilers and solar thermal panels. FITs for new applicants will be reduced during trigger point periods, allowing one month's notice should these reductions take place.

Constraint payments

Due to the fluctuating demand for power in the UK, the government is required by law to financially compensate energy providers during congested transmission periods, namely when electricity is supplied but does not reach its end user. During these periods National Grid, as the system operator, pays generators to increase generation therefore balancing the system, or by accepting a payment from them or paying them to reduce generation. '324m of constraint payments were awarded to electricity generators last year, representing an average rise of '4 extra per consumer energy bill.

With the introduction of more renewable energy sources onto our network, Minister of State for Energy Charles Hendry says the issue of fluctuation of demand and supply will become compounded, meaning the implementation of more stringent licensing is imperative.

"It is vital that the cost of balancing the electricity system is a fair one. The changes we are making aim to strike a balance between compensating generators for financial risk, and protecting consumers from excessive charges," says Hendry. "Going forward, we expect upgrades to the electricity network to improve the flow of electricity through the system and reduce the need to constrain transmission."

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