Renewable Energy in the UK – an overview

1. Renewable Energy in the UK – an overview Gaynor Hartnell Chief Executive Renewable Energy Association The sole responsibility for the content of this presentation lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

2. Overview of talk • Housekeeping arrangements • Lunch • Briefing materials • Attendance sheet – please sign • A word about the REA • Progress in UK, in context of EU27 • Overview of key electricity and heat financial instruments • Overview of Electricity Market Reform • The European Commission Proposals on Indirect Land Use Change – Clare Wenner

3. What is the REA? • UK trade association for all renewables We are unique, in that: • Over 1100 members and rising • Members of all sizes – sole traders to multinationals, with one member one vote • Cover heat, power, transport and biomethane to grid • Members active across all renewables technologies • Activities include lobbying and policy development, information dissemination to stakeholders and the wider community

4. Renewable Energy Directive2009/28/EC • Sets the EU a target of 20% contribution from renewables to energy consumption by 2020 • UK’s target is 15% from a starting point of 1.3% in 2005 • Every country has a 10% target for renewable contribution to transport fuels

8. DECC’s indicative 2020 mix, published 2009

10. Renewables Obligation (RO) • Began in 2002, will close to new entrants in 2017 • The main driver for renewable power deployment • A cross between a quota system and a premium FIT – consequently very complex • Suppliers have an obligation to source a certain amount of Renewable Obligation Certificates (ROCs) • Different technologies earn different number ROCs/MWh • Provides an incentive for suppliers to enter into Power Purchase Agreements • The impending loss of this incentive is a worry…. (and there is no priority access in the UK)

11. EMR – a few buzzwords • EMR = electricity “market reform” • CfDs = Feed-in tariffs with contracts for difference • Capacity Mechanism • Carbon Floor Price • LCF = the Levy Control Framework • Delivery plan • Allocation process • Auctions

12. EMR – what it means for RE • CfDs will replace the RO • CfDs available from 2014 onwards • Initially CfD “strike” prices will be administered • Intention is to move to technology specific auctions, then have all low carbon technologies competing together • £7.6bn spend allowed under Levy Control Framework in 2020 (covers FITs, CfDs for nuclear, CCS and renewables, and demand reduction measure TBD) • Intention is that this spend is sufficient to achieve 30% renewables • The small-scale FIT will continue (and maximum size threshold may be raised under the Energy Bill)

13. How CfDs should work Strike price Income …And this much from the CfD Reference price In total both income streams should equal the strike price, and give the generator a stable, bankable income stream The Government’s objective is that the generator earns this much for their power sales…. Time

14. Small-Scale Feed-In Tariffs (FIT) • Introduced in 2010 • For wind, AD, PV and hydro projects up to 5MW • Roller coaster, with rapid uptake in PV, where tariffs were too high • The budget was exceeded, tariffs were reduced rapidly and there were legal challenges • Tariffs are now subject to capacity-triggered degression • Minimum energy efficiency requirement introduced • Deployment slowed although returns still attractive

16. The Renewable Heat Incentive • Unique in Europe • Effectively a “Feed In Tariff” for heat • Phased introduction • Nov. 2011 first batch technologies, non domestic • Summer 2013, second batch of technologies, and householders • So far uptake slow (many of the first were legacy projects) • Tariff degression mechanism to be introduced • Teething issues on metering, accreditation –to be expected

18. Barriers -Uncertainty • Overall lack of clarity on policy direction, particularly over renewable transport and EMR • Uncertainty over RO support levels • Departmental tensions evident • Post 2020 no special treatment • Evidenced by investment slow down

19. Barriers - Planning • From cascading down of regional targets to Localism • Refusal  appeal  win = resentment • Targets not imposed, up to local communities, within context of NPPF, i.e. a “bottom up” approach • A focus on incentives = contentment • Retention of business rates • More emphasis on community involvement

20. Barriers - Planning • UK average wind consent rates under 50MW projects are around 65% (by scheme) 62% (by MW) • Average time for decision fallen from 15.5m to 14m. • Localism Act, 2011 • New NPPF, 2012 • New Minister, 2012 • This suggests that the above has not had detrimental impact that it could have had, although the unpredictability and costs of planning are still unwelcome, from the project developers’ perspective

21. Where you can help – Targets post 2020 • a decarbonisation without renewable energy targets option, relying on the carbon market and a revised ETS • continuation of the current regime, with binding renewable energy, emissions reductions and energy efficiency targets, or • an enhanced, more harmonised management of our whole energy sector with an EU renewable energy target

22. Where you can help continued... • Support UK approach to how to define End of Waste, as this will not undermine UK’s Biofertiliser Certification Scheme • Support UK stance on maintaining lower VAT rate on energy efficiency and micro-renewables equipment • Your support for our ILUC recommendations

23. THANK YOU! ghartnell@r-e-a.net