Getting the best out of FITs Save Money? and the Planet Is it as simple as that? 1 BUILDING COMMUNITIES BRIDGING CONTINENTS To a Sustainable Future Keith Tovey ( ) Rotary Club of Norwich 17 th February 2011 Presentation will be placed on WEB tomorrow at:

Potentials for Saving Money and the Planet In next 10 years there is a need to address the issues of Energy Security and Carbon Reduction of Energy Supply. In Energy Efficiency In Energy Management In Electricity Production Move from high carbon fuels: coal, oil, gas to Nuclear Renewables Carbon Capture and Sequestration 2 Reduction in Energy Use Will not be available on scale required until 2025 at the earliest. An important component to consider now because of inaction on renewables and conservation in past - but not until 2019 at earliest Available now but financial support needed for small scale and emerging technologies.

3 Wholesale Price of Electricity – weekly averages Prices have become much more volatile since UK is no longer self sufficient in gas. Announced 16 th February 2011 – Liquid Natural Gas Transportation rates are expected to double or triple in 2011 UK becomes net importer of gas Completion of Langeled Gas Line to Norway Oil reaches $140 a barrel

Electricity retail prices have risen by ~6.0% over last 10 years, much less than wholesale electricity prices but 2.2 times RPI In 1990s electricity retail prices rose by 1.3% less than 40% of RPI. 4 Variation in Wholesale and Retail Electriity Prices

Low Carbon Non-Electricity Options Heating - [Renewable Heat Incentive (RHI) – from June 2011 ] –Heat Pumps –Biofuel options for boilers –Biomass –Solar Thermal Opportunities for both Domestic and Businesses Transport - [Renewable Transport Fuel Obligation (RTFO)] –Biofuels: Biodiesel and Bioethanol –Electric Vehicles –Fuel Cells Obligation on all suppliers to include a given percentage of biofuels in petrol and diesel. 5 Incentives for Non-Electricity Options

Non Fossil Fuel Obligation (NFF0) - 5 separate tranches in 1990s. Was a Feed in Tariff, but failed to deliver largely because of planning issues. Only suitable for large generators. Renewable Obligation (RO) - from 1 st April Sets targets which all suppliers had to meet – otherwise they were fined for non-compliance (Buy Out). The fines were recycled to those bodies who held certificates (ROCs) of Renewable Generation. Currently worth around £0.3 billion. These Buy-out Fines are inflating unit price of electricity by around 0.1p or %. Used by both large scale and small scale generators From 1 st April 2010 all small generators < 50kW were transferred to the Feed In Tariff (FIT) Scheme as were all new small schemes. Medium sized schemes can opt to be in FIT or RO scheme. Large schemes can only be in RO. 6 Renewable Energy Incentives in UK - Electricity

7 Renewable Obligation Certificates The Regulator OFGEM SUPPLIERS Trader and Brokers Renewable Generator Notifies Regulator how much generated. Sells ROCs to Trader Sells Electricity with or without ROCs Notifies OFGEM of compliance -i.e. ROCs or pays FINE Supplier Buys ROCs from Trader ROCs issued FINES recycled to holders of ROCs in proportion to number of ROCs held. Because of recycling, ROCs have value greater than their nominal face value Notifies Regulator how much generated.

Wholesale Price Jan p cf Jan p 8 Incentives under the Renewable Obligation Several benefits to generator (e.g. wind) Whole sale price of Electricity Value of the Renewable obligation Certificate Mark up price arising from Buy- Out Fines Other small benefits BUT if target is met – ROC certificates become worthless Overall value might be up to 10p but could be much less At highest level of incentive – i.e. actual current value of ROC ~ 5.0p cost for reducing 1 tonne of CO 2 ~ £95 per tonne ROC Certificate 3.996p Recycled Fines 1.0 – 1.5p

The Renewable Obligation encounters risk and much paperwork for small potential generator Led to Introduction of Feed in Tariff from 1 st April A fixed amount is paid per unit and guaranteed for up to 25 years. BUT General Capital Grants no longer available Payment is for electricity generated whether it is actually exported to grid on consumed on premises. A frequently asked Question Will I have electricity when there is a power cut – assuming of course the sun is shining (if I have solar) or the wind is blowing (if I have a wind turbine)? NO!! – unless you have facilities for both Island Mode Operation and Grid Connection which can be very expensive for the small generator. 9 Feed in Tariff

10 The Technologies - Solar Solar PhotoVoltaic (Electricity) 2.16 kWp ~ 16 sqm (Suffolk) Estimated output ~ 1650 kWh/annum 3.70 kWp - ~ 25 sqm (Wales) Estimated output ~ 3000 kWh/annum Most electricity generators provide DC power and inverters are needed to convert to AC with connection to the GRID – such inverters consume some electricity ~ seasonal efficiency ~ 92%.

11 The Technologies – Micro Wind Building Mounted - ~ 1kW machines ~ generally poor performance because of turbulence Mast mounted away from buildings - 6kW Potential output 6000 – kWh depending on location Vertical Axis machine – better in turbulence

12 Micro CHP Other Technologies generating Electricity Replaces normal boiler Provides heat and electricity – would normally run on gas Micro-Hydro (Itteringham Mill) 5.5kW annual output depends on flow – 18000kWh

Payments range from 4.5p per kWh to 41.3p per kWh depending on technology and capacity of generator. –e.g. for small scale retro-fitted solar, the payment would be 41.3p for kWh generator and guaranteed for 25 years, but new entrants from 1 st April 2012 will get 37.8p An additional 3p per kWh is paid for any electricity surplus to demand which is exported. This amounts to a renewable incentive of ~39p per kWh and £742 per tonne of CO 2 ( assuming a wholesale price of ~ 5p) Nearly 8 times the subsidy for wind generation under the ROC scheme 13 Feed in Tariff ~44.3p per kWh for PV

14 Energy SourceScaleGeneration Tariff (p/kWh) Duration < 31/03/2012> 01/04/12 (years) Anaerobic digestion500kW Anaerobic digestion>500kW9920 Hydro15 kW Hydro> kW Hydro>100kW - 2MW11 20 Hydro>2kW - 5MW Micro-CHP*****<2 kW10 Solar PV4 kW new Solar PV4 kW retrofit Solar PV>4-10kW Solar PV> kW Solar PV>100kW - 5MW Solar PVStandalone Wind1.5kW Wind> kW Wind> kW Wind> kW Wind>500kW - 1.5MW Wind>1.5MW - 5MW Existing generators transferred from RO99 to 2027 Feed in Tariffs – Introduced 1 st April 2010 ***** for first installations

15 Feed in Tariffs – Example for PV Payment for tariffs will be from a levy on Utility Companies which MAY see a cumulative rise in bills of around £1 billion or more. In addition there will be a payment of 3p per kWh for any electricity exported as opposed to consumed on premises. BUT an export meter is needed to identify this. Householder will save on imported electricity at ~ 11 – 12p per kWh, so optimum financial model may not be to generate as much as possible i.e. for each unit generated and consumed it is worth = 52.3p /kWh for each unit exported it is worth = 44.3 p/kWh If no export meter is fitted : Transition arrangement of assuming (deeming) that 50% of generation will be exported will be made - that may well not be as attractive to consumer. Link to Example

Tilt N NE E SE S SW W NW N Azimuth < Solar Rosette Diagram for East Anglia Colour key: Figures show percentage output in particular orientation relative to maximum Optimum orientation is 35 degrees tilt and Azimuth 190 i.e. 10 degrees west of South

17 Renewable Heat Incentive: The Technologies Biomass boiler - most convenient if running on pellets Cheaper with wood chip but difficult to automate Pellets ~ probably comparable in price with gas, but Renewable Heat Incentive would pay for heat generated Solar Thermal – example 2.6 sqm in Norwich – generates 826kWh/year (average over 7 years). The more hot water you use the more solar heat you get! Note: Unlike FITs, the present proposals are for amount generated to be estimated and may be very different from actual – could be open to abuse and legal challenges.

18 Renewable Heat Incentive: The Technologies Ground Source: Heat Pumps Typically twice floor area of house is required for heat collection. Best performance with under floor heating – i.e difference between heat supply and source temperature is as low as possible Zones of house can be controlled via a manifold

19 Renewable Heat Incentive: The Technologies Heat pumps run off electricity For a well designed ground source heat pump system: Typically 3.5 – 4.5 as much heat is produced as electricity consumed – the Coefficient of Performance (COP). If a buffer tank is included in system, then off peak electricity can be used to heat store overnight – minimising use of full rate electricity. Air source heat pumps require external fan system, and are not as efficient as air temperature is low when most heat is needed. Retro fitting with existing radiators will lead to poor COP, but could be improved by fitting double radiators and/or a buffer tank

Renewable Heat Incentive Scale Proposed Tariff (p/kWh) Deemed/or metered lifetime (years) Solid biomassUp to 45 kW9Deemed15 BioliquidsUp to 45 kW6.5Deemed15 Biogas on-site combustion Up to 45 kW5.5Deemed10 Ground source heat pumps Up to 45 kW7Deemed23 Air source heat pumps Up to 45kW7.5Deemed18 Solar thermalUp to 20kW18Deemed20 Small Scale Installations – Table of Tariffs Tariffs for Large Installations are less. Awaiting response from Government following Consultation – information above may well change. Original target date for implementation – 1 st April 2011 Now targeted for June 2011

The Future of Incentives: From the National Infra-Structure Plan 2010 following Comprehensive Spending Review The Government will reform the electricity market, so that it attracts the private sector investment necessary to meet the UKs energy security and climate change objectives, including the investment in nuclear, carbon capture and storage and renewable technology. In addition to supporting the carbon price, this will also assess the role that revenue support mechanisms (such as Feed-In Tariffs), capacity mechanisms and emission performance standards could play. For complete information see Section 4 of 21

From the National Infra-Structure Plan 2010 following Comprehensive Spending Review The Government will maintain the Feed-In-Tariffs to support investment in emerging small-scale generation technologies in electricity, saving £40M by improving their efficiency, and complement this with the Renewable Heat Incentive to reward ground-source heat pumps and other renewable heat sources, while making efficiency savings of 20% by compared with the previous governments plans. 22 For complete information see Section 4 of

From the National Infra-Structure Plan 2010 following Comprehensive Spending Review The Government will (para 4.18): Support investment in low carbon energy supply by: maintaining Feed-In Tariffs for small-scale generation, funded through an obligation on electricity suppliers equating to a levy of almost £900 million over the period to At the same time, the efficiency of Feed-In Tariffs will be improved at the next formal review [2012], rebalancing them in favour of more cost effective carbon abatement technologies. May be an issue for PV as carbon abatement using PV is >£700 per tonne saved way above many other strategies cf ~£95 for wind, ~£20 for cavity insulation 23 For complete information see Section 4 of Equivalent to £36 per household

For Renewable Obligation: there is a small levy ~ 1% on all bills meaning that those who use most pay most – For Feed in Tariff: there is also a levy on all electricity consumed. –Those with capital to pay for installation will be paid and will save on electricity consumed and will benefit more than any rise in tariffs. –Those who do not install will see their bills rise and will be subsidising those who have installations. Is it fair to all concerned: Does it pass the Rotary Four Way Test? Current Proposals for Renewable Heat Incentive will pay an estimated amount. –What is to stop a person not using a Solar Water Heater and still receive the incentive??? 24 Who really pays for Electricity Incentives?

25 Conclusions (1) Current Renewable Electricity in UK is saving around 12 Mtonnes of CO 2 a year. The Renewable Obligation is increasing electricity bills by around 1%, levied on all consumers. The Feed in Tariff will see a further increase in bills, and will provide an income for those installing PV, etc as well as reduced electricity consumption. BUT those not installing will see their bills go up disproportionately. There is a greater return on capital if size of scheme is matched with demand

26 Conclusions (2) The Feed in Tariff for PV is a costly way to reduce carbon ~£750 per tonne compared to ~ £95 for large scale wind, and ~£20-£30 for cavity insulation. The Renewable Heat Incentive has yet to be finalised Following the Comprehensive Spending Review a review of incentives in 2012 may well significantly reduce benefits for PV, but increase those for other strategies – e.g. insulation, micro-CHP??? Previous experience suggests that existing Rights to tariffs will be Grandfathered Finally: If you want to take advantage – do so before 1 st April