Post date: Thursday, 20th October 2011

Treasury picks low carbon winners...and losers

 
Solar photovoltaic models on council houses in Ealing, London

The recent dramatic rise in solar PV installations is set to fall as subsidies are to be slashed.

The Government's reputation for supporting low carbon technology and renewable energy is now under serious question following a triple blow to CCS, Renewables Obligation support and Feed-in Tariffs for solar PV.

However, there is one source of good news, for wave and tidal stream technologies, under the new Renewables Obligation consultation announced today.

 

Scrapped: carbon capture and storage project

 

Yesterday, the much-heralded Longannet carbon capture and storage (CCS) project in Scotland was scrapped. This was because Scottish and Southern Energy had asked the UK Government for extra money on top of the £1 billion that had already been allocated to the scheme, supposedly because projected costs had risen.

The Government is still committed to CCS and is hoping other projects will come forward to use the money more cost-effectively, said Chris Huhne, Secretary of State for Energy and Climate Change.

“A billion pounds is enough to demonstrate this vital new technology in the UK, but it’s got to be spent in the most effective way," he said.

But the cancellation is being seen as a blow to the schedule for introducing this currently unproven technology, that would allow energy utilities to continue with business-as-usual while tackling climate change.

DECC said that all the research results from the CCS Front End Engineering and Design studies will be published and made freely available on the DECC website to help speed up the wider deployment of CCS, both here and abroad.

 

Slashed: solar photovoltaic FITs

 

The Government is also set to announce more deep cuts to the Feed-in Tariff (FIT) for domestic solar PV under its ongoing Comprehensive Review of FITs.

The news came following a meeting yesterday between UK solar sector representatives and the Parliamentary Renewable and Sustainable Energy Group (PRASEG) that discussed the implications of the first Comprehensive Feed-in Tariff Review.

The Head of the Feed-in Tariff Review, Rachel Solomon-Williams, said that latest figures showed that 40% more installations have been completed than have been published by energy regulator Ofgem.

She confirmed that the Comprehensive Review of FITs is underway in the Department of Energy and Climate Change (DECC).

At the end of September 2011, 316.4 MW of capacity had been installed under the feed-in tariff scheme, across 80,886 installations, of which solar photovoltaics represented 83% of total generation capacity, and 97% of all installations.

The curve of the graph of installations has been rising exponentially.

In September alone 84.7MW of PV was installed, among 16,020 sites, 48MW more than the previous month.

The success of FITs for solar PV has taken officials by surprise, with the result that installations are running ahead of cash flow.

The Department of Energy and Climate Change (DECC) is now in negotiation with the Treasury, which wants the rate of 43p per kWh cut by at least 75%.

Minister of State for Energy and Climate Change Greg Barker has offered to cut the premium payback by 50% so far and discussions are continuing.

To take the heat out of the market, the solar industry representatives floated the idea of a 25% cut for all renewables subsidies. A larger cut would mean significant job losses, it warned.

But if the Treasury has its way, the rate will be around 9p per kWh, devastating news for the owners of the 78,540 installations, rated at 264MW, around the country who had predicated their investment on the anticipated high rate of return.

Following on from the cuts of up to 70% for PV installations over 50kW made in the summer, this would be devastating news for the solar industry, which is enjoying great success with 25,000 now employed in the sector.

The founder and Executive Chairman of Solar Century, Jeremy Leggett, said that the review “feels like Groundhog Day”.

“While we were doing 200MWp, Germany did 7,000MWp. We have to overcome our culture of ‘big energy’. We need a ‘glide path’ of FiT digressions, not a ‘cliff’.

“There is never progress without confrontation, and we have to take it to Treasury. We have to debunk the lie about the cost of green energy.”

But the talk after the meeting was of solar PV once again likely to become a victim of its own success.

The Treasury points to examples of mis-selling and inappropriate siting of solar modules as evidence that funding is being misused.

A company called Apple Energy was told off on Wednesday by the Advertising Standards Authority for making misleading claims about its solar PV installations in its marketing materials.

It is possible that final confirmation of the Review's conclusions will be announced prior to or at the Solar Power UK conference next week, at which Greg Barker will be speaking.

 

Selective cuts: Renewables Obligation Certificates

 

In relation to larger scale installations, which are the ones that really matter for meeting the UK's targets for generating more renewable energy, some technologies are also set to lose support.

Under a consultation on banding for the Renewables Obligation Certificates (ROCs) announced today, landfill gas is to lose all support, and hydro-electric, standard gasification, pyrolysis, and energy from waste with CHP to have it cut by 50% to 0.5 ROCs per MWh.

A ROC is currently worth about £45.

Biomass conversion is to lose one third of its support, reducing from 1.5 to 1 ROC per MWh.

On the other hand, the practice of co-firing of biomass with coal is to have its support doubled.

However, a review is to be undertaken of the carbon balance of biomass, to ensure that it doesn't actually cause greater emissions than fossil fuels, following recent scientific evidence that it may do so, depending on the particular source of the fuel.

Both onshore and offshore wind will join many other types of generation in having 10 percentage points of support shaved off their allocations from 2014/15, by which time the Government feels costs will have come down.

But the big winners today are tidal stream (marine current) and wave power, which the Government clearly sees as technologies with huge potential, both at home and abroad.

They will see their support shoot up from 2 ROCs to 5 ROCs for projects up to 30MW in size.

The full list of proposed bandings is below in Table 1.

 

Cautious welcome from RenewableUK

 

Responding to the latest news from Government, Maria McCaffery, Chief Executive of RenewableUK, said: Any reduction in financial support will have an impact on the industry, reducing deployment, and potentially jeopardising momentum as we strive to reach our carbon reduction targets. However, we recognise the need to drive down costs across the sector, especially offshore. Any changes need to be carefully balanced as the proposed onshore reduction would have a disproportionate impact on small community-based wind energy projects, as they don’t enjoy the economies of scale which larger projects can harness”.

 

Table 1 - Proposed bandings under the Renewables Obligation consultation

 

Renewable electricity technologies Current support, ROCs/MWh Proposed ROC support/MWh Other proposed changes
Advanced gasification  2 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17

Call for evidence

Proposed change to definition and merger with advanced pyrolysis
Advanced pyrolysis  2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17

Call for evidence

Proposed change to definition and merger with advanced gasification
Anaerobic digestion 2 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17   
Biomass conversion No current band but eligible to claim 1.5ROCs under current banding arrangements 1
Call for evidence
Proposal for a new band.
Co-firing of biomass 0.5 0.5 Changes proposed to add fossil derived bioliquids.
Co-firing of biomass (enhanced) No current band but 0.5 ROCs under current banding arrangements 1
Call for evidence
Proposal for a new band.
Co-firing of biomass with CHP 1 1 Changes proposed to add fossil derived bioliquids, to exclude enhanced co-firing and to close this band to new accreditations from 1 April 2015.
Co-firing of energy crops 1 1 Changes proposed to the definition of energy crops and to exclude enhanced co-firing.
Co-firing of energy crops with CHP 1.5 1.5

Call for evidence

Changes proposed to the definition of energy crops, to exclude enhanced co-firing and to close this band to new accreditations from 1 April 2015.
Dedicated biomass 1.5 1.5 to 31 March 2016
1.4 from 1 April 2016 
Changes proposed to exclude biomass conversions and to add fossil-derived bioliquids
Dedicated energy crops 2 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17 Changes proposed to the definition of energy crops and to exclude biomass conversion.
Dedicated biomass with CHP 2 2 in 2013/14 and 2014/15 Changes proposed to add fossil derived bioliquids, to exclude biomass conversion and to close this band to new accreditations from 1 April 2015.
Dedicated energy crops with CHP  2 in 2013/14 and 2014/15
Call for evidence
Changes proposed to the definition of energy crops, to exclude biomass conversion and to close this band to new accreditations from 1 April 2015.
Energy from waste with CHP 1 0.5
Call for evidence
 
Geothermal 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17   
 Geopressure  1  1  
Hydro-electric  1  0.5  
Landfill gas   0.25

 0

Call for evidence

 
 Microgeneration   2 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17   
 Onshore wind  1  0.9  
 Offshore wind 2 in 2013/14; 1.5 from 2014/15 onwards 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17   
 Sewage gas  0.5

 0.5

Call for evidence

 
Solar photovoltaic  2 2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17   
Standard gasification 0.5
Call for evidence 
Proposed change to definition and merger with standard pyrolysis 
Standard pyrolysis 

0.5

Call for evidence 

Proposed change to definition and merger with standard gasification  
Tidal impoundment (range) – tidal barrage (<1GW)  2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17    
Tidal impoundment (range) – tidal lagoon (<1GW)  2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17    
Tidal stream  2 5 up to a 30MW project cap.
2 above the cap. 
 
Wave 2 5 up to a 30MW project cap.
2 above the cap. 
 

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