Contracts for difference for new onshore wind?

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After the 2015 Conservative manifesto pledge to “end any new public subsidy” for onshore wind farms, developers have been locked out of the Contracts for Difference (CfD) framework*.  New research reveals however that ministers could allow onshore wind bid on new contracts without contradicting its previous pledge to end all new subsidies.

The report** produced by industry experts Baringa Partners, commissioned by industry body Scottish Renewables, states that by allowing developers to bid in the first round of the auction, the industry could deliver an extra 1GW of capacity in the UK at the hugely competitive price of £49.40 per MWh. This is around half of the strike price agreed by the UK Government for Hinkley Point C nuclear power plant, after being adjusted for inflation.

Since the 2015 subsidy ending announcement there has been a marked slowdown in the rate of development. Neil Stuart, Chief Executive of Scottish Renewables said:

“Some companies are continuing to look at projects, but it is very difficult to see them going ahead without some sort of intervention,”

“If you want to deliver onshore wind capacity at a scale, which will make a meaningful contribution to the UK’s work to meet climate change targets and secondly keep bills down for consumers then you will need a CfD framework.”

Bidding on the first round of the CfD auction would not represent a subsidy as more money would return to the consumer over the last two thirds of the contract than the limited top up in the first third as the wholesale price of electricity increases. This would represent an overall saving for consumers.

The report also highlights the incredible reductions in the costs of renewables, particularly onshore wind, around the world. The decreasing price of turbines and auction mechanisms to ensure competition have seen the price tumble worldwide. The government can still now plan an important role in offering a low-risk route to market for subsidy free onshore wind.

The report that allows the UK Government to provide subsidy free support to onshore wind comes after a Conservative thinktank Bright Blue published a new survey*** claiming that the majority of Tory voters actually support on shore wind.

*The CfD mechanism is in place to stabilise revenue and cost for developers, thereby lowering the cost of capital and in turn minimises the cost of energy.

** https://www.scottishrenewables.com/publications/baringa-sr-analysis-potential-outcome-pot-1-cfd-/

*** http://www.brightblue.org.uk/images/Green%20conservatives%20polling%20report%20Final.pdf

BREXIT – A brief view of some of the energy implications of the UK voting to leave the European Union

BREXIT

The result of the UK referendum over EU membership has potentially huge implications for renewable energy. Perhaps the most significant of these is the UK may no longer be in the EU Internal Energy Market (IEM).

Completion of the EU’s internal market requires the removal of obstacles and trade barriers; the approximation of tax and pricing policies and measures in respect of norms and standards; and environmental and safety regulations. The objective of these is to help create a functioning market with fair access and a high level of consumer protection as well as adequate levels of interconnection and generation capacity. The IEM has led to the development of interconnections, to help reduce isolation of Member States from the European gas and electricity grids. Being part of energy union would have provided a huge market for UK renewables, such as its growing offshore wind fleet. Furthermore, it would have benefited energy security as renewable generation increases its overall share in the grid, through smoothing of generation variability.

The National Grid are certainly fearful of an exit from the IEM, with a spokeswoman saying: “It is vital the UK retains access to the IEM, which provides stability for energy companies and helps keep household bills down…UK energy security depends on gas and electricity from the IEM and it is essential therefore that we take no risks with that. The issue of energy needs to be treated with the highest importance by the government as the negotiations on Britain’s exit begin.”

Key players and commenters in the sector are almost unanimously giving a negative outlook as a result of the leave vote. These include factors such as higher costs, consumer impacts and a likely reduction in funding of scientific research; but the result is perhaps best summed up by Professor Rob Gross, of Imperial College, who said: “victory for leave creates uncertainty, risks instability, weakens the UK’s negotiating position and, at least in the short term, discourages investment.”  The lack of stability and certainty will not only impact renewables but other low carbon energy projects; for example, the scraping of the controversial proposed nuclear power plant at Hinkley Point (which was to be built by the French company EDF) seems a likely outcome of the referendum.

It is clear that energy policy needs to be a priority for the new government, to give reassurance to the industry. However, even if it does become a priority it would seem optimistic not to view the vote to leave the EU as negative for the UK energy system and low carbon energy in particular.

Sources:

Quotes are taken from https://www.theguardian.com/environment/2016/jun/28/leave-vote-makes-uks-transition-to-clean-energy-harder-say-experts

For background information on the IEM http://www.europarl.europa.eu/ftu/pdf/en/FTU_5.7.2.pdf

Low carbon economy sustains 238,500 jobs across UK

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Some 96,500 businesses were operating in the low carbon sector – from renewables such as wind and solar power to electric vehicles – in 2014, the most recent year for which figures were available.

A third of those (34%) were primarily focused on low carbon business, the Office for National Statistics (ONS) data show.

Energy efficiency products was the biggest sector, generating £21.9 billion in turnover and employing the equivalent of 155,500 people, while renewable energy generated £15.9 billion turnover and sustained the equivalent of 43,500 full-time jobs.

Energy efficiency products was the biggest sector, generating £21.9 billion in turnover and employing the equivalent of 155,500 people, while renewable energy generated £15.9 billion turnover and sustained the equivalent of 43,500 full-time jobs.

Overall more than 4% of non-financial sector businesses were active in the low carbon and renewable energy sector, and it generated 1.3% of non-financial turnover.

The sector generated exports worth nearly £4.8 billion and imports of £5.9 billion, with l ow emission vehicles taking the lion’s share of exports, accounting for 60% or £2.9 billion, the figures show.

Scotland had the biggest percentage of companies active in the low carbon sector, with 5.2% of non-financial Scottish businesses involved in clean tech, energy efficiency and renewables and providing the equivalent of 21,500 full time jobs.

http://www.belfasttelegraph.co.uk/news/northern-ireland/low-carbon-economy-sustains-238500-jobs-across-uk-34726007.html