Renew your energy: August 2011 Archives
In a report on the prospects for solar photovoltaics (PV) in the UK, consultants Ernst and Young suggests that falling solar costs and rising fossil fuel prices could make large-scale solar PV installations cost-competitive without government support within a decade. And with support, for example under the Renewables Obligation Certificate (ROCs) scheme or the Feed In Tariff (FiT) scheme, 'if the UK were to adopt net metering, large scale building connected projects could be generating 5% real pre-tax returns with 2 ROCs between 2013 and 2014. Without net metering and ROC or FiT support, our analysis indicates that solar PV is likely generate this level of return by 2017. Grid parity with retail prices is expected to be achieved in the UK by 2020 without subsidy for non-domestic, on-site installations'. They add 'Projects at high irradiation locations may become economic with 2 ROCs by 2012, and reach parity with retail power by 2017.' They define 'high irradiation' as 1323kWh/m2 yielding 1032kWh/kWp.
The report was produced for the Solar Trade Association (STA), who clearly see a case for interim subsidies to get PV to full market competitiveness rapidly- after which they would not need support. The STA commented 'With solar, no new expensive infrastructure is required. It is a 'plug in' technology, easily deployable now. By investing in it, Britain's solar revolution could pay for a breakthrough into inflation-free, safe, green power. Done at scale, it could then grow without further subsidy and lead the research that will make costs of solar panels fall even faster.'
It went on 'Solar PV has the potential to meet more than 30% of UK electricity needs before 2040. It is deployable now to meet UK carbon reduction targets. It is accessible and popular, and the industry has been growing rapidly, with decreasing costs, and stimulating employment and growth prospects for the UK economy'.
So you would think that it would feature strongly is government thinking. Unfortunately no. The STA notes that 'Solar has been excluded from DECC assessments of technology costs and it's role is barely mentioned in the Electricity Market Reform proposals' DECCs Renewables Roadmap also excludes it from its top eight chosen technologies for future rapid development. http://environmentalresearchweb.org/blog/2011/07/emr-white-paper-all-change.html And worse still, the 'Clean Energy Cashback' FiT for PV projects over 50kW has just been cut back dramatically. http://environmentalresearchweb.org/blog/2011/08/solar-cuts.html
Unsurprisingly, Howard Johns, STA Chair, said 'The Government has got it wrong on solar. We are on the cusp of a global solar revolution, major markets all over the world recognize that solar energy is critical to our future. Germany plans to generate 50% of its day time electricity from solar by 2020- their targets are for 52 GW of solar energy compared to 2.7 GW for the UK by 2020.' Large projects are more cost effective and supporting them helps build capacity fast. As the UK Solar Trade Association has pointed out, 50kW, the new UK ceiling, is hardly large compared to many projects in Germany, or the USA.
Certainly its booming elsewhere- with over 40GW installed globally and expanding fast. The UK reached a pitiful 122MW in June. Basically, under the impact of premium fixed price FiT schemes in Germany, Spain France and Italy, volume and markets have been building rapidly and prices are falling significantly. Technology has also been improving. HSBC calculates that the cost of solar cells - the key component in panels - has fallen by about 70% since Sept 2008. The USA's GE says its new PV cells should be able to generate power at $150/MWh by 2013, similar to the cost of conventional power. Bloomberg noted that in some sunny locations in the US, Italy and Turkey, PV is already cheaper than grid power.
The boom have been so large that Germany, Spain, Italy and France have reduced FiT tariff levels more than the planned annual price 'degression' rates, to avoid passing on what some saw as too much extra cost to electricity consumers. Not everyone was happy with that- some say they should have, stayed the course to get prices down rapidly.
However it's clear that, despite this slow down, the global market will continue to boom. It could reach 130-200 GW by 2015, according to the European Photovoltaic Industry Association. But this won't be just a European expansion. Japan should soon be back in the race- at one time it was a PV leader. Following Fukushima, Prime Minister Natoto Kan told the G8 Summit 'We will do everything we can to make renewable energy our base form of power, overcoming hurdles of technology and cost', with PV, along with wind, a main focus. China too is pushing PV use domestically harder now- it's aiming for 10GW by 2015. It is already a major global PV exporter.
Will the UK miss out? There has been talk of letting others get prices down before we adopted/supported the technology seriously. However, Energy Minister Greg Barker has admitted that 'historically, DEC has underestimated the contribution that solar can make', so maybe DECC will now compensate. Not by a U-turn on the existing FiT for large projects perhaps- too embarrassing. And the proposed new 'Contract for a Difference' FiTs won't be in play for several years. But, the Renewables Obligation system will continue to take in new projects until 2017, and a ROC boost for PV would be good, if nothing else.
Otherwise we may be missing out on a key option. The 'received wisdom' is that solar is expensive and not very sensible in the UK. Well both of those views now clearly need revising. Cost are falling and, with proper grid integration, PV solar, large and small, can make a major contribution. Perhaps surprisingly, in the maximal indicative trajectory explored by DECC in its 2050 Pathways analysis last year, PV potentially expands to deliver 140 TWh by 2050. That is more than their maximum estimates for wave and tidal stream (139 TWh) and for on land wind (132 TWh). An option worth checking out?
STA led solar campaign: http://www.oursolarfuture.org.uk
Around 15 large solar farms have connected to the UK grid, beating the August 1st deadline for the imposition of the savage cuts of up to 72% to the PV solar Feed-In Tariff (FiT) for projects over 50kW. In all about 60MW of ground-mounted projects made it, according to a Solar Portal review: http://www.solarpowerportal.co.uk/blogs/justhowmanysolarprojectsbeatthefasttrackreview5478/ .
Some of the smaller ones include the 1 MW Ecotricity Fen Farm project in Lincolnshire, the 1.4 MW Wheal Jane park in Truro, and a 7450kW Solar century project at Howbery business park in Oxfordshire. Larger ones include the 5MW Gehrlicher Langage project near Plymouth- 5MW was the limit originally imposed for the FiT. Interestingly, at that time, DECC said it had gone for 5MW since 'we want to give ourselves a bit more flexibility... to include projects like schools, hospitals and community schemes'. But now, with a new government in power, 5MW is clearly seen as too much for PV.
It was quite a race against time to beat the deadline. EOS Energy installed a £3m 1.15MW farm at a holiday park near Newquay in just 7 weeks. Lark Energy/Lightsource managed to complete two large ones - a 4.9MW farm at Hawton, Notts, and a 4.5MW project at Marston, in Lincolnshire, the latter built in just six weeks. Swindon-based Sunstroom managed to fit 20,000 solar panels on a 36-acre brown-field site in just five weeks.
However that's about it for now. Solar Century told the Guardian that the cuts means that 'virtually all investors have withdrawn from financing such developments. There were probably many hundreds lined up for development across the country. They're pretty much all canceled now because of the fast track review. This type of installation will be a relative rarity for a few years.' But it was optimistic about the future. 'They will come back because tariffs and subsidies for solar are a necessary device to create the industry right now but the rate of change of price of solar is on a strong downward trend. Within a few years, the amount of subsidy needed will go down significantly. When that happens, more of these can happen with less cost and become more attractive to investors.'
They also seem popular with local people. For example, the 5 MW solar farm project proposed by Vogt Solar Ltd for land north of Bourn, Cambridgeshire, was the subject of a local community consultation process last year, via an exhibition, website, email and postal questionnaire. Of the 46 people who completed the questionnaire, 41 (89%) were 'very supportive' or 'supportive' of the plan and 3 (7%) were 'undecided', two (4%) were 'opposed' or 'very opposed'. 91% of respondents said they supported the use of renewable energy to help to combat climate change, whilst aiding the security of the UK's energy supply; and 93% said they supported the use of solar power as a source of renewable energy.
It seems pretty clear that local people were happy with it, and similar projects elsewhere have got strong local support, so why has the government decided to block projects on this scale by cutting the FiT support that they would have attracted? The ostensible reason was that commercial projects on this scale would reduce the money available for domestic scale PV projects- the scheme having had an artificial total cost cap imposed. The FiT support is paid by a small extra on all electricity bills, so it's up to consumers- would they object where it went, or if there were more schemes so that the cost to them was larger? Arguably you get better value for money with large schemes- and more capacity faster. What's not to like?
There had also been hopes that community based schemes would prosper. One scheme did make it. Not-for-profit company Sussex-based Ovesco launched a share issue for a proposed 98 kW solar installation on the roof of Lewes' Harveys Brewery, who leased their roof in exchange for free electricity, which will be used primarily to cool its beer, Sunshine Ale. Any surplus will be sold back to the grid, and the additional revenue used to fund community projects. It just made it before the deadline, so it gets the old full tariff.
The original tariffs were quite generous it's true. But the cuts were very savage, with the tariffs being reduced from 31.4 - 26.8p/kWh (for 4kW - 5MW) to 19p (50 - 150kW) 15p (150 - 250kW) and 8.5p (250kW - 5MW)
Apologists for the cuts said that they mean there will be a larger number of smaller projects, creating a larger constituency for supporting PV power, but in reality the result seems to have been that the UK PV solar industry has been seriously undermined- there may not be enough well off people able to afford PV to compensate for the loss of these larger projects.
This all seems very odd given that the government says that it sees solar PV as likely to move ahead to become a major renewable source. FiTs help capacity build so that prices fall, but you have to stay the course.
What next? Soon we should hear the results of the full review of the Feed In Tariff system for electricity generation projects- the recent cuts were just the results of the 'fast track' review of large 'solar farm' PV projects. But the Budget talked of seeking to shave off at least £40m from the FiT programme, so more cuts are likely for PV and maybe other green electricity options. One way to look at it is to see this all as a preliminary to the introduction of the proposed new more competitive-market orientated 'Contracts for a Difference' FiT system for renewables, nuclear and Carbon Capture, although whether that will help smaller renewable electricity generating schemes is unclear.
What is clear is that the government is more interested in the short term at least in green heating, and in terms of solar, solar heat collectors, which are a lot cheaper to install than PV. They are to be supported by the £860m Renewable Heat Incentive (RHI) scheme -running, for domestic projects, from next year. As a preliminary to that, for off gas-grid areas, it has launched a £15m 'Renewable Heat Premium Payment' scheme- which opened for applications on 1st August- the same day that the PV tariff cut came into force! It's a grant scheme funded by the government (i.e. the taxpayer), not a Feed In Tariff (with costs passed on to consumers).
DECC says it will support up to 25,000 installations, with grants set at £1,250 for a ground source heat pump; £950 for a biomass boiler; £850 for an air source heat pump; and £300 for solar thermal water heaters. On average, this should work out at about 10% of the total cost of the equipment and installation. Landlords will be encouraged to access the grants to improve their housing stock, with £3m of the £15m set aside for them.
It will be run by the Energy Saving Trust, but it doesn't cover Northern Ireland: www.energysavingtrust.org.uk/RHPP
The devolved Scottish government has produced a 2020 Routemap outlining its new targets for meeting 100% of Scotland's electricity needs and 30% of its overall energy needs from renewables by 2020. Scotland already meets over 27% of electricity demand from renewables and the government said that it is on target to reach its existing target of 11% of heat from renewables by 2020 So it thought that, with the ambitious electricity target, it can expand its total energy target to 30%. www.scotland.gov.uk/Publications/2009/07/06095830/2020Routemap
However, its plans have been called unrealistic, unachievable and not in the best interests of energy consumers, in a report from Inverness-based Mackay Consultants. Tony Mackay, lead author of the 'Prospects for Scotland's Energy Industries 2011-20' report, told the Scottish Herald the general standard of the reports used to back the plans 'has been very poor and in many cases very biased,' and argued that the electricity industry accounted for only 18% of final energy consumption in 2010, much lower than the 42% share for petroleum products- mainly petrol and diesel for transport- and the 37% for natural gas- mainly for heating. So he said 'it is difficult to understand why electricity generation is such a high priority'. Presumably the answer is that, as in the UK, some electricity will be used for heating and for transport, and there should be a lot of it available.
Certainly, in response to Mackay's comments, the Scottish Government stressed that the target is for Scotland to generate twice what is needed to meet all its electricity demands, with 100% of electricity from renewables and the same again from other sources: 'This analysis is wrong. Scotland already produces more than one-quarter of electricity from renewables and we have enough renewables capacity installed, under construction or consented to provide almost 60% of our electricity needs. By 2020, Scotland will be generating double the amount of electricity we need, with additional electricity generation met by clean energy plants progressively fitted with carbon capture and storage technology.'
And Niall Stewart, chief executive of Scottish Renewables, told the Herald 'we stand by all our research. The industry is very confident these targets are achievable and indeed there is already more than enough in the pipeline.'
Writing in International Sustainable Energy Review he explained 'essentially, Scotland will export a percentage of its total electricity generated across the UK and further afield to Europe when output from renewables is high, and will depend on electricity from nuclear and fossil-fuelled generation and imports when output is low'.
Put that way, it doesn't sound quite so radical or daunting. In particular, note that, although no new plants are envisaged, the plan still relies on Scotlands two existing nuclear plants- and their operational life may be extended. Scottish National Party energy minister, Fergus Ewing, speaking in a Holyrood debate on the 100% renewable routemap, said: 'We are perfectly open to an extension of the life of the existing nuclear power stations provided that case is justified on economic and environmental grounds and therefore we recognise that that case exists and it exists because of the need to secure security of supply. That is something that we have always recognised whilst we are opposed clearly to building new nuclear power stations.'
A SNP government spokesman denied there had been a change in policy- they had always accepted that the life of Hunterston and Torness could be extended, and anyway they had no powers to prevent this. But they could block new nuclear plants through the planning process.
Friends of the Earth Scotland saw it as 'deeply disturbing and utterly disappointing. The SNP has always been viewed as anti-nuclear and I'm sure many SNP voters will feel quite misled when they learn that this is not the case anymore.' That is perhaps overstating it- the SNP has made clear it is still against any new plants. But there are worries about life extensions. Hunterston B, which will be 40 years old when its current license runs out in 2016, was already the focus of safety concerns, and FoE had already urged Ewing to commission an independent review of the risks of continuing to run reactors. Torness, near Edinburgh, which is due to run until 2023, had to be shut down recently because of sudden influx of jellyfish around its water intake pipe!
Meanwhile Scotland's renewables expansion programme has not always been going exactly to plan. Although its mainstay, wind power, is doing well, with 3.4GW in place and around 20GW seen as possible, including about 10GW offshore, wave energy has had some problems. Pelamis Wave Power, the Scottish firm championed by SNP leader Alex Salmond as an example of Scotlands emerging marine economy, is to lay off nearly a third of its employees. The Edinburgh-based wave power developer has announced a major restructuring which will cut at least 20 of its 70 highly skilled posts. Pelamis is moving to a new phase of the development of its Pelamis P2 articulated 'wave snake' device, built for Eon and Scottish Power Renewables, and said the job losses were a result of a shift from a 'manufacturing focus to an operational phase'. With more projects likely expected, this may be just a temporary blip, but perhaps more seriously, RWE npower renewables has pulled out of the 4MW Siadar Oscillating Water Column wave project on the Scottish island of Lewis., leaving the main developer, UK wave pioneer Wavegen, now owned by Voith Hyro, in an uncertain position.
However it is not all bad news. Pentland Orkney Wave Energy Resource (POWER) Ltd's 28 MW project has been selected by DECC to be put forward to the European Investment Bank for consideration for funding under the EU's New Entrant Reserve scheme. It would have 10 Aquamarine near-shore Oyster hinged-flap wave devices and 24 offshore Pelamis machines, with a single point of connection to the grid. In parallel, progress is being made on the various tidal stream projects. Indeed RWE said that "Tidal seems simpler to develop and it's going to be easier and quicker to develop than the Siadar [wave] technology."
Overall, the SNP plan says it should be possible to have over 5GW of wave and tidal capacity installed off the Scottish coast, with the 1.6GW programme for the Pentland Firth area seen as just the start. Projects within that have completion dates in and around 2020, with tidal stream projects dominating.
There is currently about 7 GW of renewables capacity installed, under construction or consented around Scotland, and this should enable it to exceed its interim target of 31% of its electricity demand from renewables in 2011. That's well ahead of the UK as a whole. According to DECCs latest statistics, by the end of 2010 the UK had reached 6.8% of UK electricity and 3.3% of total energy. The UK target is 15% of total energy from renewables by 2020. Cleary the Scottish contribution would help - if it can be achieved. But 100% of electricity by 2020- contributing to 30% of total energy? That's really pushing it.
The changes announced in the White Paper on Electricity Market Reform (see my previous Blog: http://environmentalresearchweb.org/blog/2011/07/emr-white-paper-all-change.html) still leave us with basically a market driven system, but the variable price 'Contract for a Difference' (CfD) support system will provide differential treatment for some energy options. The White paper says that the CfD approach is likely to lead to a more rapid decarbonisation trajectory than a guaranteed premium price Feed-In Tariff system since it 'provides increased revenue certainty for low-carbon technologies, and therefore brings on low-carbon generation plant sooner.' One way to read this is that it supports nuclear and maybe CCS more than renewables. Certainly many greens see that as the main purpose of many of the EMR measures, while the UK Energy Research Centre was still worried about having a single CfD mechanism, and a 'one size fits all' approach: its details would need careful design.
Nevertheless renewables will get supported, along with nuclear and CCS. Offshore wind is clearly favoured, with 18GW seen as possible by 2020, up from the 13GW in the 2009 Renewable Energy Strategy, and that was welcomed by the industry group Renewable UK. For the other renewables, the new DECC Roadmap, published in parallel with the EMR White Paper, says 'the range of cost uncertainty is particularly large for technologies such as marine, which is at the early stages of commercial deployment in the UK, and biomass heat technologies, for which supply chains have not yet been tested at scale. Cost reductions are expected to be most pronounced for electricity technologies, particularly offshore wind and solar PV, as supply chains and technologies develop to 2020. The cost of generating heat and electricity from fossil fuels is also expected to rise over time'.
The PV solar lobby was perplexed by the exclusion of PV from the top 8 options selected in the DECC Renewable Roadmap, despite DECC's acceptance that PV cost could fall dramatically. Solarcentury said, 'The renewables roadmap makes it clear Government expects large-scale solar PV to be cost-competitive with offshore wind and dedicated biomass electricity generation, and cheaper than all marine in 2020.' So why downplay it?
However, some commentators talked up marine renewables, which were included in DECC's top 8, even claiming that 'marine power will match nuclear and offshore wind for cost in 14years': www.eaem.co.uk/news/marine-power-will-match-nuclear-and-offshore-wind-cost-14-years
That's not impossible. The Carbon Trust's new report on marine renewables says that 'with targeted innovation energy generation costs for both wave and tidal stream technologies could reduce to an average of 15 p/kWh by 2025 - equivalent to today's cost of offshore wind energy' and also says that, with continued and targeted innovation, 'the UK's best marine energy sites could generate electricity at costs comparable with nuclear and onshore wind' perhaps as soon as 2025. www.carbontrust.co.uk/news/news/press-centre/2011/Pages/MEA.aspx
Of course the offshore wind resource is very much larger. Even the optimistic PIRC study only put tidal stream at 116TWh, whereas the new DECC pathways study has offshore wind at 926TWh, while PIRC puts it much higher. But tidal is clearly coming on. Wave maybe less so. The Carbon Trust says that, on initial commercial deployment, wave costs could be £280 MWh, tidal £160/MWh. But it adds that developments overseas could speed up progress on wave in particular.
Heat pumps are in DECC's chosen 8 top technologies and, if there is a lot of offshore wind or nuclear output, they may have a role (using the excess power they would produce at night when demand for electricity is low), though CHP/District Heating might be a better heating option in urban areas. But some of DECCs other, if only tentative, ideas, e.g. on network/grid balancing demand side management (DSM) and capacity support, could clearly be helpful. Business Green said 'the announcement that demand response- cutting demand at peak times- will be able to compete with new power stations is a real positive. Using conservative estimates, National Grid estimates that 2GW of demand response could be available by 2020. This could prevent the need to build - and pay for- two large power stations alone. But the potential for demand response is much greater, at around 11GW, or a sixth of our current power demand'.
However the EMR White paper doesn't do a lot for smaller renewable energy projects. Juliet Davenport, CEO of green energy supplier Good Energy, said the decision to press ahead with the CfD was worrying for projects below 20MW. 'It's a very complex instrument that will do little to encourage new independent energy generators but will favour the more established players. It restricts smaller suppliers' ability to buy power and compete with those big suppliers who have been hiking prices recently, and that's not good for the consumer.'
So what's the final verdict? Most large energy industry interests were guardedly welcoming. The Telegraphs headline however was 'The nuclear option may keep our lights on, but at what cost to the UK?'
Chris Huhne had warned that 'the scale of investment needed to keep the lights on is more than twice the rate of the last decade,' but made much of using competition to keep prices down as much as possible- and there was talk of challenging the effective market monopolies of the big six energy suppliers. But critics fear that, in its eagerness to find a way to support nuclear without direct subsidies, and maintain competitive markets, DECC's complex EMR mechanism may not achieve either goal- or even yield as much carbon saving as hoped, with perhaps a new dash for gas emerging. Time will tell. But Friends of the Earth pointed out that gas prices have risen 84% since 2004, and domestic energy bills by 90%. Over the same period, the costs of renewables have increased to only about 1% of energy bills: 'If we keep relying on dirty imported energy and expensive nuclear to power our homes, we'll all pay the price for years to come.'
Prospective UK nuclear developer RWE was also surprisingly dour: 'The mechanism can easily be changed by subsequent governments, thus long-term investment decisions are unlikely to be influenced by it.' There's no pleasing some! Even with a £16/ tonne Carbon floor price from 2013, rising to £30 in 2020 and £70 in 2030!
Some commentators were more positive, and there may be some benefits for renewables e.g. from the Carbon floor price, longer-term . But the CfD and the proposed auction system is not that different from the old Non Fossil Fuel Obligation, which was very ineffective at delivering successful projects. So some fear that renewables will not progress that well under the EMR, especially since the marine renewables budget has just been effectively halved, and the solar FiT cut by up to 70% for projects over 50kW. As for offshore wind ,18GW may be possible but, under the EMR, there are no renewable targets built in- it's up to the market. Whereas 16GW of nuclear, and ideally much more, seem to be built into the governments thinking and, arguably, the EMR. So it was perhaps not surprising that the verdict on the EMR from the renewable energy magazine ReFocus was very bitter: 'the UK Government seems to be on the way to pulling off a conjuring trick of shifting incentives towards nuclear and away from renewables, with hardly a whimper of opposition'.
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