UK - Government sums don’t add up on renewable energy

The BWEA (the British Wind Energy Association) today shot a warning across the bows of Government that the level of support for renewable energy must increase if government targets are to be met. The warning headlines its response to the Government’s consultation on reforming the Renewables Obligation (RO), jointly prepared with the Renewable Energy Association (REA). This consultation, stemming from last year’s Energy Review, proposes significant change to the RO, the support mechanism for renewable power in the UK.

While BWEA welcomes the Government’s intention to increase the quantity and diversity of renewable energy delivery to the grid, the Association is clear that the attempt will succeed only if financial support is increased.

Commenting on the reform proposals, BWEA Chief Executive Maria McCaffery said:

“The RO has been highly successful in bringing forward the cheapest renewables: onshore wind, landfill gas and biomass co-firing. The Government’s plan to ‘band’ the RO could allow more technologies to share in this success, particularly offshore wind but this cannot be at the expense of onshore wind’s current strong growth. Accommodating the more expensive technologies whilst trying to get to a 20% target in 2020 – using the same amount of money as a 15% goal – is like trying to extract a quart from a pint pot. It just doesn’t add up.”

At present the Obligation rises to 15.4% of licensed electricity supplies in 2015, and is then stable until 2027, when the RO ends. Due to the design of the system, the money within it is dictated by the Obligation level and the buy-out price, the penalty that suppliers must pay for not meeting their requirements. The buy-out price rises with inflation, but now Government is intending to freeze it in 2015, so it will decline in real terms thereafter. At the same time, Government proposes to allow the Obligation level to rise in line with supply after 2015, up to 20%. By freezing the buy-out price, the Government wishes to get this rise to 20% for the same cost as 15%.

In addition, by banding the system so that more technologies are economic, this 20% would have to include capacity that is more expensive than would be brought forward by an unreformed system. Thus Government is attempting to get a third more renewable power, with a mix that includes significant quantities of technologies that are not economic under the current system, for the same amount of money. This is unrealistic.

BWEA also finds Government’s call for ‘net neutral banding’ to be problematic. Under net neutrality, the number of units of renewable electricity and the number of Renewable Obligation Certificates would be the same – currently 1MWh=1ROC, but banding breaks this link; Government would like to manage the system so it continues to balance. However, in order to do so, what is given to more expensive technologies has to taken from the less expensive, and the ‘spare’ resource in the system that can be reallocated is not enough to incentivise large quantities of, for instance, offshore wind.

Consequently, BWEA is calling for two specific actions: a reversal of Government’s decision to break the link between the buy-out price and the Retail Price Index; and the abandonment of the proposal for ‘net neutrality’. Together, these two technical changes proposed by Government add up to a limiting of the resource available to support renewables.

In addition, the Association is pointing out that the majority of difficulties that renewable developers face are nothing to do with the RO. If the issues of gaining planning permission and a grid connection could be resolved swiftly, then the UK could be making much better progress towards its renewable energy targets, even without reform of the RO.

BWEA’s full response is available on request and will be posted online at www.bwea.com

The DTI’s Reform of the Renewables Obligation consultation document is available at http://www.dti.gov.uk/consultations/page34162.html

For further information contact:

Alison Hill, Head of Communications, 020 7689 1966 / 07956 859 749 / alison@bwea.com

Dr Gordon Edge, Director of Policy, 020 7689 1967 / 07816 830 180 / gordon@bwea.com