Renewables heading for brick wall despite success
The success of the Renewables Obligation (RO) is underlined by the latest set of figures from DECC, but at the same time news from developers in the field suggest that renewables growth is about to hit a brick wall because of the Government's Electricity Market Reforms. Renewable electricity generated 11 per cent of UK power in the first quarter of 2012, continuing an increase since the RO was introduced in 2003. Yet renewables developers are facing stagnation in the face of uncertainty surrounding the Electricity Market Reform (EMR) proposals. A representative of one independent renewable developer told me that they had been told by a leading electricity supplier that no power purchase agreements were available for independent developers after 2014.
EMR is supposed to take effect in 2017, but before then is a 'transitional' period and the various caps that the Treasury are imposing threaten to cut back renewable development as early as 2014. The EMR effectively restricts development opportunities to the 'Big Six' since in order to qualify for the so-called 'contracts for differences' (CfD) developers have to trade on electricity markets - an option which is effectively open only to the electricity suppliers themselves. EMR restricts competition by freezing out the independents, whether they are large companies or small community windfarms.
The most cost-effective system for the consumer, and one that works very well for all developers, is the German-style 'fixed' feed-in tariff system, promoted elsewhere in this blog. This option, once again, seems to have been overlooked in the scramble to try to launder subsidies for (what look like increasingly unlikely) new nuclear power stations.
However, given the brick wall facing renewable developers the next best thing would clearly be an extension of the Renewables Obligation beyond its closure date date for many independents of 2014. This could be easily achieved. If the Government retains even a shred of seriousness about the green energy agenda, then it should urgently issue an extension to the RO until it has sorted out the mess that is represented by the EMR proposals - and install a 'fixed' feed-in tariff in the long term.
The Treasury is obsessed with impacts on consumer prices, to the exclusion of the advantage of renewable energy in stabilising energy prices. It is not much good having more natural gas instead of renewables if the energy prices for the consumers fluctuate wildly with volatile gas prices. Robert Gross of the United Kingdom Energy Centre (UKERC) has done some good work on the impact of renewable energy on consumer bills. He points out the flaws in right wing attacks on renewable energy funding - which seem to influence Treasury thinking these days (see earlier post on Treasury support for cuts to onshore wind ROCs). See: