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ESRC SEMINAR THE INTRODUCTION OF THE UK RENEWABLES OBLIGATION

ESRC SEMINAR THE INTRODUCTION OF THE UK RENEWABLES OBLIGATION. University of Bath, 9 May 2008 Iain Todd Renewable Energy Consultant. Renewables Obligation. Introduced in 2002 Main policy instrument for renewables in the UK; treats all technologies equally

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ESRC SEMINAR THE INTRODUCTION OF THE UK RENEWABLES OBLIGATION

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  1. ESRC SEMINARTHE INTRODUCTION OF THE UK RENEWABLES OBLIGATION University of Bath, 9 May 2008 Iain Todd Renewable Energy Consultant

  2. Renewables Obligation • Introduced in 2002 • Main policy instrument for renewables in the UK; treats all technologies equally • Emerging technologies also to receive supplementary, variable support • RO support forecast to rise to £1 billion per year by 2010

  3. NFFO scheme • Renewable energy companies bid for competitively-let, long-term contracts, to supply electricity at premium rates • Mixed success • Costs of renewables fell during 1990s • But projects delayed due to planning, technical and commercial reasons; certainly no market transformation

  4. Objectives of RO (1) • To transform the market, to transfer renewables into the mainstream from a peripheral position • To compel energy suppliers to develop major renewable energy projects • To provide long-term commitment in legislation (2027)

  5. Objectives of RO (2) • To use the power of the market to control costs • To harness competition between energy suppliers

  6. Objectives of RO (3) • To assist energy security • To create economic opportunities for domestic companies • To promote innovation, to reduce unit costs

  7. Technologies • Several consultations • Exclusion of large hydro • Exclusion of incineration of mixed waste • Inclusion of live NFFO sites • Buy-out price increased from £20 per Mwh to £30

  8. Early life issues (1)(2002-2004) • Communication • Confidence, esp financial sector • Calls for more help from some technologies • Calls for greater duration – extension from 2010 to 2015 • Extension of co-firing policy from 2011 to 2016

  9. Early life issues (2)(2002-2004) • TXU bankruptcy (£20m in first year) • Differences between England/Wales and Scotland • Introduction of Northern Ireland • Headroom • Exit strategies

  10. Effectiveness (1)

  11. Effectiveness (2)

  12. NAO report (2005) • “It is unlikely that a policy tool focussed directly on reducing emissions across all sectors of the economy – such as a carbon dioxide tax – would have yielded the same level of renewable generation in this time.”

  13. NAO report (2005) • “The level of support provided by the RO is greater than necessary to ensure that most new onshore wind farms and large landfill gas projects are developed.”

  14. NAO report (2005) • “No criterion for reducing or withdrawing support from a particular technology.”

  15. NAO report (2005) • NAO consultants predict hitting 2010 target • Report recommends consideration of banding • Report recognises planning and grid as the key factors affecting the success of the policy

  16. NAO report (2005) • “Co-firing will not discourage the development of other non-biological sources of renewable generation” • There is a confusing proliferation of support schemes – Carbon Trust, DTI Technology Programme, RDAs, now ETI …

  17. RO v Feed-in • Reward for generation of renewable electricity, per Mwh • Could vary between technologies • Could either be fixed sum, or vary with the market – ideal might be elements of both?

  18. RO v Feed-in • Pace of development in UK not set by RO v Feed-in • Pace of development set by planning regime • And in future possibly constrained by grid

  19. RO v Feed-in • Speculatively, non-variable rewards might favour more community-based schemes, which might move more quickly through the planning system • But very speculative

  20. Trading of certificates between countries • Not the same as harmonisation of support schemes • Investment would be drawn to the area of greatest economic efficiency • Missed opportunity to reduce costs

  21. Future development of RO • Banding • Trading; eventual link to ETS? • Devolution (marine, island, EFW) • Fixed rewards for micro-renewables ? If so, boundary?

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