Yet the contrast between Tony Blair's call for "Britain to be a leading player in this coming green industrial revolution", and the reality on the ground is stark. While countries such as Germany and Spain, with much poorer wind and biomass resources, roar ahead with more than 7000 MW and 4000 MW of wind capacity alone, the UK has a mere 400 MW in place. What has gone wrong with our renewable energy policy so far? Can it be rectified in time to make a difference to our carbon emissions and the need for diverse and secure energy supplies?
With a major energy policy review by the Cabinet Office's Performance and Innovation Unit (PIU) now underway, and the nuclear industry lobbying hard for big new subsidies, this is a critical time for an industry with huge potential but modest impact so far.
Harnessing the natural energy flows of the planet by intercepting the wind, waves, solar heat and light, and the energy from plants (biomass energy) has led to thousands of ideas ranging from the weird to the plain ordinary. Many work, but much fewer work at an economic rate. Those that do have progressed rapidly from the laboratory to the world market place. Solar photovoltaics (pv) is now a $1.2 billion per annum industry and growing at 30% per year.
The global wind industry has a capacity of 17 GW, is worth £2.75 billion per annum and growing at 30-35% per annum. Wind has brought on more new capacity than nuclear power for the past two years and is set to move offshore with bigger and more efficient turbines.
The biomass industry, covering everything from chicken litter to special energy crops such as willow, provides the bulk of Europe's current renewable capacity. It is set to expand rapidly in countries such as Germany, Finland and Austria. In the UK, wind and biomass energy alone could provide between 55-70% of total electricity supplies within 20 years, while biomass has a big heat potential.
Overall, the global market for the 'new' renewables industry (ie excluding big hydro) is worth around $40 billion per annum today, and its potential for further growth is huge. The World Energy Council (WEC) suggest that renewables could provide from 30-60% of global energy needs within the next 50 years.
So much for the potential, but what about the reality of renewables in the UK today? It is a very mixed picture. After emerging from a prolonged r&d phase, commercial renewable energy investment took off in the UK after the electricity industry was privatised by Margaret Thatcher. To balance the subsidy provided for nuclear power, a non-fossil fuel obligation gave guaranteed prices for renewable generators in the early 1990s. This phase ended when the Labour Government came to power in 1997. Since then a great deal of polemic has issued forth, as well as a relentless series of consultation papers, culminating in the current Renewable Obligation (RO) proposals.
Unlike the simple 'feed-in tariff' subsidy systems used in countries such as Germany and Spain, the UK tries to marry its free energy market approach with its need for low-carbon energy supplies. While the 3p/kWh subsidy looks attractive, things are not what they seem. Smaller, independent developers will only get 50-75% of the RO subsidy from larger suppliers like Scottish Power, Innogy, Powergen and TXU-Europe as the price for the eight to ten year contracts necessary to attract project finance. Adrian Lloyd, a partner with Enviro-Finance, a specialist renewable finance company, feels that as a result the smaller, unlicensed generators will be the first casualties of the RO scheme. He says: "This is a huge pity, as these smaller developers have the biggest success in getting planning permission for projects."
Even the full 3p subsidy won't be sufficient for some of the more expensive renewable technologies such as energy crops and offshore wind. Some limited grants are on offer for these technologies, but at best these would stimulate a few hundred megawatts of capacity.
Biodegradeable targets
Biomass developers are the most downbeat about the government's RO proposals. While generally welcoming the RO approach, David Williams, managing director of EPRL the country's major waste and biomass developer says: "Setting a 98% biodegradable target for the use of waste in biomass generation is an impossible goal for us to achieve. It's disingenuous. It's a bit like saying to the biomass industry, 'Come in and enjoy the game, oh and by the way the goal posts are only an inch wide'. It's a way of dressing up the fact that [the Department of Environment, Food and Rural Affairs] just doesn't want waste to count in the renewables target at all."
EPRL is increasingly looking at state-of-the-art combined waste recycling and incineration plants. Its plant at Corby mixes biomass wastes with 25% municipal waste, but with such a combination it would not count as an RO project. Its new Riverside plant will have one of the highest recycling recovery rates – 95% by weight and 85% by energy content – but it still won't meet the proposed 98% biodegradable targets.
Sylvan Robinson, chairman of British Biogen, the biomass industry trade association, says: "The economics of biomass schemes such as energy crops would be enormously helped by the use of waste streams. If even 25% of the fuel was municipal green waste, attracting gate fees normally paid for dumping in landfill, it would transform the rates of return."
Robinson is concerned that the industry's proposal for Rural Development Certificates to bump-start the growing of willow for coppicing and other energy crops by hard-pressed farmers have been acknowledged by the DTI, but no commitment has been made. Given the dire state of UK agriculture, shifting subsidies to energy crops ought to be an obvious policy. Nothing is that simple in Whitehall however. DTI insiders have told BSJ that it will take a significant grant from DEFRA to make that a reality.
Other problems for UK renewable developers have been delays in our planning system and the country's new electricity trading arrangements (NETA). At one point in early 2000 less than 10% of wind park planning applications were getting through. This has been due to a combination of nimbyism, lobbying by countryside groups, and a fear that once the go-ahead is given to one development, many more will follow. In recognition of these problems, a series of regional targets for renewables is being developed.
NETA, an on-line commodity trading system for electricity, started in March 2001. It has done no favours to smaller and more intermittent supplies such as wind and combined heat and power (chp). In a report published by the regulator (OFGEM) in August, power exports from these smaller generators have dropped 44% since NETA went live, with prices falling 17%. Nick Goodall, Chairman of the Confederation of Renewable Energy Associations (CREA), comments: "OFGEM has verified long-held concerns that NETA is incompatible with the UK renewables and chp targets. The NETA process is damaging existing renewable energy projects and sending out the wrong signals to an industry increasingly investing in future sustainable energy." The regulator, Callum McCarthy, has suggested that bigger subsidies be provided.
As a result of the Government's sometimes conflicting policy goals, uncertainty remains for the UK renewables industry. Adrian Lloyd, says: "I am not advising clients that the UK is a good market for renewables investment. France, for example, is a much better bet for wind development. The only UK options likely to provide attractive returns are landfill gas and onshore wind, when you can get planning permission."
European counterparts lead the way
The muddle and delay of UK renewable policy is in contrast to other European countries such as Germany, Spain, Denmark and Austria. Germany has led the way, with massive growth in wind, solar pv and shortly, biomass energy. It has taken a simple approach which allows lucrative 'feed-in' rates for renewables to bump start an industry. Wind capacity has shot up to more than 7000 MW while their 100 000 solar roofs programme target by 2003 has been hugely successful. With a feed-in rate now agreed for biomass, more than 1000 MW of new capacity is already being planned. In Denmark, a consistent and integrated set of policies involving grants, tax breaks, planning support and easy access to the grid has allowed the country to reach a 10% target for wind. The country has three of the world's top ten wind manufacturers.
Tom Pedersen, a managing director at leading wind company Vestas, describes the three key requirements for a viable wind industry: "First you need the wind technology and the resource," says Pedersen. "Then you need the financial means, and finally you need a regulatory environment that's positive".
In Austria and Finland, all three issues have been addressed in the government's support for biomass energy. Both are now exporting technologies and management approaches. They have used a mixture of targets, grants, a tax system that encourages low-carbon energy, and a long-term public-private partnership to make the industry commercial and successful overseas.
Will the PIU Energy Review cut through the muddle and delays of previous renewable energy policy? Due to report in late December, it will take both a short-term and long-term (50-year) perspective. Gareth Thomas, MP, chair of the Parliamentary Renewables and Sustainable Energy Group, has recently argued in a Fabian Society pamphlet1 for changes to the current government approach. He writes: "If we really want to unlock the huge UK potential we need bigger financial resources, new institutions, and changes to energy regulation."
Thomas has called for a £1 billion programme to bring on nearly 3000 MW of renewables capacity, as well as a new Sustainable Development Agency to drive the implementation of policies. He also asks for a new philosophy in energy regulation: "For the past decade we have used a simple price driven form of regulation. This has brought lower prices, but it is ill-equipped to bring forward the low-carbon revolution we now need to avert catastrophic climate change." He proposes instead a performance-driven form of regulation that would reward energy companies for bringing on chp and renewables capacity, an approach favoured by a DTI-OFGEM working party earlier this year.
If the UK is to meet the 60% plus reductions in carbon emissions over the next four to five decades which are now deemed necessary by scientists, a massive expansion in renewables capacity as well as an energy efficiency revolution will be necessary. As Brian Wilson, the fourth Energy Minister in as many years, gets to work after his summer break, he has a lot of problems to tackle. Known to be pro-nuclear, will he use the current difficulties with renewables to resurrect nuclear power or will he finally unlock the sleeping giant of renewable energy in the UK? Watch this space.
Renewable energy markets
Germany Powerhouse of the European wind industry, with more than 7000 MW of capacity, an ambitious 100 000 solar pv roofs programme, and a new feed-in rate stimulating significant biomass investment. Denmark More than 10 000 jobs are now generated by the industry which has an aggressive export and joint-venture approach. 10% of its electricity comes from wind, with offshore wind set to grow rapidly, plus steady growth in the use of biomass energy. It has set targets for 35% of its electricity to come from renewables by 2030. Spain A relative latecomer to the wind industry. Big growth in the last few years has led to more than 4000 MW of capacity. France Until recently a poor market for renewables as policy was dominated by the nuclear industry. Attractive feed-in price for wind may lead to 5000 MW of new capacity. Finland/Austria The big successes in Europe’s biomass industry, based around forestry and agricultural industries. Finland has around 1200 MWe of biomass chp in operation, with plans for a further 860 MWe and 1700 MWt over the next decade. Austria has more than 1 million wood furnaces in use, plus more than 350 biomass district heating plants with an operating capacity of 500 MWt.Source
Building Sustainable Design
Reference
1 At the Energy Crossroads: Policies for a Low Carbon Economy, Gareth Thomas, MP and Stewart T Boyle, Fabian Society (info@fabian-society.org.uk).
Postscript
Stewart Boyle is a freelance writer and energy consultant.