An update for 2011/12 explaining the principles and aims behind the UK government's subsidies for alternative energy projects, and the changes made by the UK government to their renewable energy incentives in the recent past.

1. THE UK RENEWABLE ENERGY
INCENTIVES AN UPDATE:
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The UK Renewable energy Incentives
An Update: Including Changes For 2011/12
THE UK's Coalition Government is committed to establishing improved
long-term energy security for the nation by incentivising an increase in the
implementation of renewable energy throughout the UK.
Their stated aim is to increase renewable energy output in the of
electricity, heat and transport sectors; to achieve 15 percent of its energy
demand being met from renewable sources by 2020, and it has pledged to
do this in the most cost-effective way.
In addition to the UK target, the devolved administrations have also set
themselves more ambitious national targets:
the Scottish Government has introduced a target to deliver 100
percent renewable electricity by 2020;
the Northern Ireland Executive has a target to deliver 40 percent
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3. THE UK RENEWABLE ENERGY INCENTIVES STEVE
renewable electricity and 10 percent renewable heat by 2020;
and the Welsh Government has indicated that it has the potential to
produce twice the amount of electricity it currently uses from
renewable sources by 2025 and to deliver 4GVV of this from marine
energy.
So, how are they doing this?
Renewables Obligation
THE RENEWABLES Obligation (RO)
This scheme is designed to incentivise renewable electricity generation. It
is currently the main mechanism to enable renewable electricity
generation to compete effectively with fossil fuel generation, by providing
support in addition to the electricity price.
The RO obligates licensed electricity suppliers to source a specified and
increasing percentage of their electricity sales from renewable sources.
The RO is administered by the Gas and Electricity Markets Authority (the
day-to-day functions of which are performed by Ofgem).
Every operator of a qualifying renewable energy power source applies for a
ROC (Renewables Obligation Certificate).
The Renewables Obligation Certificate (ROC) is a certificate, issued by
Ofgem, to accredited renewable electricity generators, for any eligible
renewable electricity that is generated.
To meet their obligations, suppliers can present Ofgem with enough ROCs
or make a buy-out payment. The buy-out price sets the rate which
suppliers need to pay if they do not present sufficient numbers of
Renewables Obligation Certificates (ROCs) to meet their obligations under
the scheme. They can also use a combination of ROCs and buy-out to meet
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their obligations. The buy-out price was £30 per MWh in the base year,
2002/03. In 2011/12 it is £38.69.
Since being introduced in 2002, the RO has increased the level of
renewable electricity generation in the UK from 1.8 percent to 6.64
percent. During 2009/10 the scheme was valued at approximately £1.42bn
per year in support to the electricity industry.
In April 2010, the Government extended the end date of the RO from 2027
to 2037, providing increased long-term certainty for investors.
In July 2011 the Coalition Government published a UK Renewable Energy
Roadmap, setting out its approach to unlocking renewable energy
potential.
What Renewable Sources are Eligible for ROCs?
Under the Renewables Obligation the following energy sources are
eligible:
landfill gas
sewage gas
hydro (for installations exceeding 20MW declared net capacity only
those commissioned after 1 April 2002 are eligible)
on-shore and off-shore Wind
co-firing biomass
other biomass
geothermal power
tidal & tidal stream power
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wave power
photovoltaics
energy crops
energy from waste (see Table for clarification).
In addition to being an approved source, all installations must be located
within the UK, its territorial waters or the Continental Shelf. Also, only
stations initially commissioned or re-equipped on or after 1 January 1990
(apart from micro-hydro and co-firing stations) are eligible.
All combined heat and power (CHP) installations must be accredited under
the CHP Quality Assurance Scheme to be eligible. Schemes that comply
fully with the Good Quality benchmark receive ROCs on the electricity
generated from the biomass fraction of the waste. For schemes that
comply partially, this is scaled back depending on their efficiency.
Banding
The rules of banding have been changed.
Previously, one ROC was issued for each MWh of eligible renewable
electricity output generated.
However, from 1 April 2009, "banding" was introduced, where different
technologies receive different levels of support dependant on their costs
and potential for large-scale deployment (ie onshore wind receives one
ROC/MWh while energy crops receive two ROCs/MWh).
On 20 October 2011 DECC released a consultation on levels of banded
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support under the renewable obligation banding review 2013/17. Some of
the key changes for the resource and waste management sector are
reduced support for standard pyrolysis and gasification, energy from waste
with CHP and landfill gas.
Bioliquids are being proposed as eligible for the same number of ROCs as
biomass, this includes fossil derived bioliquids. To ensure that bioliquids
are not diverted from other uses of greater priority (eg transport) a cap on
the use of bioliquids is being proposed at four percent of each supplier's
renewables obligation.
There is a proposal to replace the current standard and advanced
gasification and pyrolysis bands with two new bands. This is to distinguish
between more proven steam cycle technologies and those that are more
innovative using more efficient engines or gas turbines.
CHP uplift for new stations on or after 1 April 2015 and new build CHP will
be supported through a combination of RO and Renewable Heat Incentive,
this proposal will be supported with CHP capacity added between 1 April
2013 and 31 March 2015 being able to choose power only RO bands plus
RHI or RO CHP band. There is also a further proposal to grandfather CHP
under the RO from 1 April 2013.
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Further Information
www.ofgem.gov.uk
www.decc.gov.uk
www.energysavingtrust.org.uk
UK Renewable Energy Roadmap:
www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-en
ergy/2167-uk-renewable-energy-roadmap.pdf
Source: This newsletter is based upon the CIWM’s Fact File “Incentivising
Renewables” 2011/12.
Latest News (May 2012)
Government Announces Landmark Green Investment
The Government’s UK Green Investments team (UKGI) is to make its
landmark first investment in green infrastructure.
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A total of £80 million has been committed to two specialist fund managers
who will make and manage investments in the small scale waste
infrastructure sector on behalf of the Department for Business, Innovation
and Skills.
An initial fund of £50 million will be managed by Foresight Group and an
initial fund of £30 million managed by Greensphere Capital.
All BIS investments made by the fund managers will be match-funded,
leveraging in at least £80 million more to the projects. The investment
decisions will be overseen by a new Investment Committee.
The Government is investing directly, on fully commercial terms, ahead of
obtaining state aid approval for the UK Green Investment Bank (GIB).
The fund managers will be responsible for generating and managing
investments in areas such as waste recycling and reprocessing facilities,
pre-treatment projects and energy-from-waste projects.
The appointments have been made following the launch of a competition
in December 2011 seeking experienced fund managers to manage
Government investments in waste infrastructure projects. The
Government will also make a further £100 million available for investment
in the non-domestic energy efficiency sector.
More at: UK Government announces landmark green investment
Disclaimer
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liability. All warranties, express or implied, are hereby disclaimed. The
information provided does not constitute advice of any kind.
© 2012 by IPPTS Associates.
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