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Supporting Renewables REFIT Feed in-Tariffs, the UK Renewables Obligation and the new EU Directive Prof. Dave Elliott Open University

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Presentation on theme: "Supporting Renewables REFIT Feed in-Tariffs, the UK Renewables Obligation and the new EU Directive Prof. Dave Elliott Open University"— Presentation transcript:

1 Supporting Renewables REFIT Feed in-Tariffs, the UK Renewables Obligation and the new EU Directive Prof. Dave Elliott Open University

2 The UK has enviable renewable energy sources Potential % of overall UK electricity supply in 2050 Onshore wind8-11% Offshore wind18-23% Wave/Tidal12-14% Biomass9-11% PV solar6-8% TOTAL53-67% Based on overall likely level of supply of 400-500 TWh in 2050 Source: DTI/Carbon Trust Renewables Innovation Review 2004

3 Initial UK renewables support programme

4 Current UK Renewable Energy Support Programme National Targets: 10% of UK electricity to come from renewables by 2010 15% by 2015 and up to 20% by 2020 R&D Funding: typically £20-30 m /year Capital Grants: £400m + mainly for offshore wind, energy crops £50m capital grants plus revenue funding for wave and tidal currents £50m Low Carbon Building programme (PV/microgeneration) Users - Climate Change Levy 0.43p/kWh tax on (most) business use of electricity- but users of power from renewable sources exempt. Suppliers - Renewable Obligation Electricity supply companies must move in steps to source 10.4% of their electricity from renewable generators by 2011, or purchase equivalent Renewable Energy Certificates from companies who have excess, or pay a 3p/kWh 'buy out' fine. Incentives:


6 At present the Renewables Obligation is the UKs main support mechanism - it awards companies with Renewable Obligation Certificates (ROCs) for each MWh of eligible power they produce, set against targets.

7 UK RO: Renewables Obligation- a quota/ trading system Overall renewable target increased in stages- 10% by 2010, 15% by 2015, 20% by 2020 Renewable Obligation Certificates (ROCs) given for each eligible MWh Suppliers pay ~ 3p/KWh buy out fine if they dont meet their RO target -that sets the prices ceiling for projects Or they can buy ROCs from those who have more than they need- so ROCS are valuable and traded. Prices variable- depend on the market for electricity and for ROCs. This uncertainty makes it hard to get investment capital for new projects- so suppliers have to charge more.

8 UK Renewables Obligation: Results: Relatively high prices and not much capacity e.g 2GW of wind Some mature wind projects on good sites may get more subsidy than they need. Cost to the consumer- 5-6% extra on bills by 2010 Less developed renewables cant get started. UK unlikely to meet its quite low targets, despite proposed modifications to RO- technology bands with different ROC allocations. Capital grants have had to be provided to try to get new renewables going - £500m so far

9 UKs Renewables Obligation costs more than REFIT Feed -in Tariff as used in most of the rest of the EU

10 German REFIT: Renewables Feed-In Tariff (EEG) Suppliers have to pay fixed prices for renewables Prices are set at different levels for each technology Prices are reduced in stages (degressed) over time reflecting their expected development. Results: Massive expansion of wind (~20 GW). Also PV solar (~2GW) Lower prices per kW and per kWh than Renewables Obligation Cost to consumer ~3% extras on bills so far. 214,000 jobs created


12 The current levels of renewable deployment have been achieved at a cost to the consumer that is over 40% higher compared to what could have been achieved with a REFIT organised in a way that is broadly similar to that operating in Germany Dr Dave Toke in the World Future Councils report Making the UK Renewables programme FITTER Aug. 2007

13 Renewables Obligation pays out more than some mature projects now need < £740m excess RO wastes money

14 Renewables Obligation may pay out more than is need to some mature projects - including possibly on land wind projects on good sites OFGEM estimates in 2005 RO excess payments

15 REFIT in Germany -degression of prices for wind

16 European Commission Support of Electricity from renewable energy sources 2005

17 REFIT systems are used by most EU countries

18 RO may have stimulated opposition to wind * The competitive pressures the RO creates mean that companies have to seek out high wind speed sites- which are usually of more scenic value. This had led to a backlash from preservation groups and interests. * The fact that the RO gives support to some projects that may not need it has added to the backlash against wind- with charges of profiteering being levied. In Germany and Denmark most wind projects are on sites with much lower wind speeds than would be considered economic in the UK- and there has been very little local opposition. In the UK around 70% of project proposal have been blocked with regular often bitter local objections.

19 RO has mainly benefitted large companies Many UK national opinion polls have found that wind energy is a very popular option – typically 80% support it. But there are local objections to some projects- they may be seen as being imposed on communities. Local ownership means less local opposition- more support The UK gets around 1% of its electricity from wind - 98% of wind farms are owned by large companies in the UK. Denmark gets 21% of its electricity from wind- over 80% of the turbines are locally owned by wind co-ops or local farmers There are many less objections… Its the same for Germany- 50% are locally owned. RO makes it hard for co-ops to set up projects- only two so far in UK Danish wind co-op meeting

20 Local Ownership of wind projects

21 Micro generation Low Carbon Building Programme Renewables Low Carbon Micro- wind Micro CHP Electricity PV solar Electricity Stirling Engines Fuel Cells -gas fired Solar Heating Others : Electric powered Others : Biomass for heat /electricity Heat Pumps

22 Micro-generation Technology No. Installations Micro-wind 650 Micro-hydro 90 Ground source heat pumps 546 Biomass boilers (pellets) 150 Solar water heating 78,470 Solar PV 1,301 Micro-CHP 990 Fuel Cells 5 Total 82,202 Source: Our Energy Challenge: Power from the People, Microgeneration Strategy, DTI, March 2006

23 Energy minister Malcolm Wicks says that in the proposed new consultation on how the UK can meet the new EU target "we will be looking afresh at micro-generation, and any proposals to boost micro-generation, including a feed-in tariff, are ones we are open to consider." But he insisted that this "is not at all challenging the mainstream renewables obligation" which he clearly will not abandon. "I think it is important for confidence, including investor confidence, that we don't, as it were, change policies halfway through. I am confident about the reforms we are making," i.e to the RO. Wicks quoted in the Guardian Feb 20th 2008

24 EU Renewables Directive- % electricity by 2010 _ >

25 Share of renewable energies in gross electrical consumption in European Union countries in 2005- and 2010 targets

26 / UK New EU aim: 20% of EU energy from renewables by 2020... Some EU countries have already reached 20% But for many, still a long way to go.. and the RO isnt helping the UK

27 EU Directive 2008: National targets for 2020- 20% EU energy target Share of energy from renewables in final consumption 2005 2020 Sweden 39.8% 49% Latvia 34.9% 42% Finland 28.5% 38% Austria 23.3% 34% Portugal 20.5% 31% Denmark 17.0% 30% Slovenia 16.0% 25% Estonia 18.0% 25% Romania 17.8% 24% Lithuania 15.0% 23% France 10.3%23% Spain 8.7% 20% Germany 5.8% 18% Greece 6.9% 18% Italy 5.2% 17% Bulgaria 9.4% 16% Ireland 3.1% 16% Poland 7.2% 15% United Kingdom 1.3% 15% Slovak Republic 6.7% 14% Netherlands 2.4% 14% Belgium 2.2% 13% Cyprus 2.9% 13% Czech Republic 6.1% 13% Hungary 4.3% 13% Luxembourg 0.9% 11% Malta 0.0% 10%

28 New EC Renewables Directive- trading The European Commission initially considered imposing a mandatory EU- wide green certificate trading system. However this was resisted strongly. The fear was that that pressure to meet the new EU targets would force up the price of any spare renewable energy available for trading. Suppliers might then decide to abandon REFIT, for which prices are falling under the degression system, since they could get more by selling their output/credits on to under-performing countries. The end result, with the REFIT system undermined, could then be higher prices all round, and less capacity being installed.

29 Guarantees of Origin system The Commission backed down and its new plan recognised explicitly that well-adapted feed-in tariff regimes are generally the most efficient as well as effective support schemes for promoting renewable electricity. It backed a voluntary Guarantee of Origin certificate trading scheme, but just for any excess energy over and above national targets. And this energy cannot be part of a REFIT scheme -or an RO scheme. So, given the tight targets, REFIT is safe for now. So is the RO- and the UK will continue with the RO

30 EU -ETS The European Commission hopes the EU Emission Trading System will provide a competitive stimulus for renewables expansion, although the first round can hardly be seen to have been a success- caps were set to high. Tougher national targets have been set for some countries for the second round (2008-2012), especially for new EU countries, and a new scheme proposed for after 2012 Proposed and allowed carbon emission caps in the EU ETS (million tonnes CO 2 allowances) 2008-12

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