APPENDIX 12
Memorandum from the Energy Saving Trust
The committee asked the following areas to be
investigated:
1. Levels of achievement so far and the current
rate of progress.
2. Expectations of the proposed renewables
obligation and the definition of "acceptable costs to the
consumer".
3. The impact of the all the Government's
reforms of the electricity market, including new trading arrangements
for electricity generation, on the prospects for new renewables
capacity.
4. The level of Government spending on renewables-related
R&D.
5. The level of government support for non-fossil
fuels for electricity generation over time.
6. The interaction of the planning system
and the development of renewable sources of power generation.
It is our intention to concentrate our response
on areas where we feel the Trust's expertise can benefit in achieving
the aim of the inquiry. These would be areas 2 and 3. We would
also like to point the committee towards our submissions to consultations
by the DTI on the new renewables obligation, to Ofreg, on stimulating
renewables generation in Northern Ireland, and to the DCMS, on
using money from the New Opportunities Fund to support renewables.
All these responses are attached to the submission of evidence
in appendices 1-3, and reflect current Trust policy on renewables
in the UK.[38]
EXECUTIVE SUMMARY
The Energy Saving Trust welcomes the increased
support for renewable energy that the last years have seen. We
believe that particular areas of renewable energy, eg community
renewables need a further increase in support. This can have valuable
benefits for the acceptance of renewable energy in the whole population
and contribute to rural development.
The Trust believes that the overall costs of
a sustainable energy policy have to be measured taking into account
the supply and demand ends of the market. We believe that the
additional cost of renewable energy production will be balanced
by a reduction in energy cost achieved through energy efficiency
measures, leaving the cost neutral. Energy efficiency measures
work progressively, and contribute to the well-being of a particularly
disadvantaged part of the population, thereby generating further
benefit.
The current uncertainties in the supply market
revolve mostly around the introduction of NETA and the report
of the Embedded Generation Working Group. We believe that the
effects of NETA on renewable energy should be closely monitored,
and we hope the government will take forward the measures proposed
in the EGWG report.
INTRODUCTION
1. The Trust was established as part of
the Government's action plan in response to the 1992 Earth Summit
in Rio de Janeiro, which addressed worldwide concerns on sustainable
development issues. The Trust is the UK's leading organisation
working through partnerships towards the sustainable and efficient
use of energy by households and small businesses. Our membership
includes the Secretary of State for Environment, Transport and
the Regions, the First Minister of the Scottish Parliament, the
National Assembly for Wales, the Secretary of State for Northern
Ireland, and many of the UK's energy companies. This response
should not be taken to be the policy of any member of the Trust.
The Trust's main interest lies in promoting
the efficient use of energy, and to this end it carries out a
variety of activities, such as administering national energy savings
programmes under the Energy Efficiency Commitment, research and
development into new energy services offerings. The Trust also
currently provides accreditation for renewable energy tariffs
under its Future Energy scheme. The Trust is currently assessing
the feasibility of projects that would be aimed at stimulating
household level renewables and community projects, through the
provision of advice and practical support.
COMMENTS
2. Expectations of the proposed renewables
obligation and the definition of "acceptable costs to the
consumer".
Support for renewable electricity generation
The Trust recognises that the generation of
renewable electricity in the UK has received increased policy
support during the last year, with the publication of the preliminary
consultation on the RO, the commitment to fund large-scale, new
technologies like energy crops and offshore wind, the publication
of regional planning targets and the recommendations by the Embedded
Generation Working Group. These developments create a positive
environment for the growth of renewable electricity generation
in the UK. Current barriers include uncertainties about the impact
of NETA, the planning process, the current problems in getting
connections to the grid, and the falling price for electricity,
generated by fossil fuel and nuclear power stations.
Community-level renewables
The Trust would particularly like to see a policy
development aimed at increasing the deployment of community level
renewables, following the example of Swaffham, where the installation
of Ecotricity's turbine has been a huge success. More detailed
recommendations for increasing deployment of renewable generation
can be found in the response to Ofreg, together with our response
to a consultation on the use of money from the New Opportunities
Fund.
Another exciting development is the potential
for household-level renewables, eg solar water-heating and rooftop
photovoltaics. There is currently little support for non-grid
renewables, and none for heat/transport. The Renewables Obligation
does not currently propose to explicitly support community schemes.
Acceptable cost to the consumer
Regarding the "acceptable cost to the consumer",
we would like to encourage the government and the regulators to
think in terms of an integrated, sustainable energy policy. While
the cost for renewable generation are higher than that of large-scale
fossil generation, because the latter does not have to pay for
the externalities caused by it, there are also benefits to consumers
from installing energy efficiency measures. We expect that in
the period to 2010 the cost to consumers in total will be neutral
between the increase in energy efficiency and the increased deployment
of renewable generation. The Renewables Obligation and EEC could
be linked symbolically, to increase public understanding and acceptance
of the expenditure and benefits involved in achieving a sustainable
energy market in the UK.
Voluntary green tariffs
The introduction of funding through the Renewables
Obligation will create problems for the future design of voluntary
green tariffs, because of reluctance by NGOs to back green tariffs
that are not additional. Additional green tariffs would have to
factor in the extra funding given to ordinary renewable generation
through the Renewables Obligation. This would most likely price
them out of the market.
We believe that the way forward could be voluntary
green tariffs based on a fund model, where the funds are being
used to create additional capacity outside the RO. Our discussions
with NGOs on the matter indicate that they would support such
a model. We are concerned that green tariffs in some form should
still be an option in the domestic market, to allow consumers
the choice to avoid pollution through their electricity consumption.
This will secure increasing awareness of renewables issues, and
will still allow committed customers to "lead" the market.
The regulator should monitor the market for green tariffs on a
regular basis.
3. The impact of the Government's reforms
of the electricity market, including new trading arrangements
for electricity generation, on the prospects for new renewables
capacity.
NETA
The introduction of NETA is generally seen as
a barrier to the further deployment of renewable capacity by the
industry. This is related to the unpredictability of when renewable
capacity will be available to generate, and an expectation that
it will be penalised under NETA rules. Whether the emergence of
consolidators (as has been suggested by Ofgem) will solve the
problem remains to be seen following the introduction of NETA.
While this is the ideal solution in theory, in practice it may
be difficult, and renewable generation may not be able to demand
a sufficient price for the electricity generated, if it has to
work through intermediaries. We would suggest close monitoring
of the developments in the market following the introduction of
NETA and a very early review of NETA's effects on renewable generators.
Embedded generation working group
The work of the EGWG was aimed at providing
a framework supporting the deployment of smaller scale, embedded
generation. The results of the forthcoming consultation will be
crucial to the future deployment of renewable generation capacity
in the UK. Especially in the light of the challenging target set
for renewable capacity expansion until 2010, new access arrangements
for this generation are necessary. The EGWG has provided a good
and insightful overview of the issues involved. In the opinion
of the Trust, further consultation should consider the impact
of the reforms on renewable generation, and aim to reflect contributions
made to network performance by this form of generation in the
price it receives.
January 2001
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