Memorandum Submitted by the British Wind Energy Association (EN 12)
The Energy Bill provides an opportunity to address the pending UK domestic energy gap which will occur as the current generation of aging nuclear and fossil fuelled power stations are retired over the next 15 years.
By 2016, 17GW of the current 80GW of UK electricity capacity will already have been retired, and up to a further 15GW will either close or be severely restricted in use. By 2023 there will be just one nuclear power station operating, Sizewell B - generating just over a single GW of electricity.
The retirement of one third of the UK's domestic capacity could lead to severe overdependence on imported gas supplies, as even under the new planning regime, it will still take at least 10 years for a new generation of nuclear power stations to be built. By 2020 80% of the UK's gas supply will be imported, leaving the UK exposed to international markets with 60% of the world's natural gas reserves in Russia, Iran and Qatar. Already over the last 12 months gas prices have risen from 30p per therm to 55p per therm.
On January 23rd the EU Commission announced each country's national allocation for contributing to the binding target of providing 20% of all Europe's energy from renewables by 2020. The Commission's proposal for the UK's allocation is 15% of its overall energy supply. In order to achieve this target the UK will have to supply 30-40% of its electricity from renewable sources, which would mean a minimum 33GW of wind energy, on- and offshore.
Britain urgently requires a new generation of clean, affordable energy supply from domestic sources. Renewables, and wind energy in particular, are the only UK energy source that can deliver the scale of generation needed within the time frame necessary to avoid over reliance on increasingly expensive imported gas supplies.
Provisions currently in the Bill
There are two sections currently on the face of the Energy Bill that directly impact on the renewable energy business: the reform of the Renewables Obligation and the clause on the licensing regime for offshore transmission.
The reform package for the RO has been extensively consulted on over the past two years, and BWEA as been actively involved both formally and informally in this process. It is our desire now that the necessary primary legislation is passed swiftly so that the secondary Renewables Obligation Order can be consulted on and passed by Parliament so that the new system is implemented on 1 April 2009. If the Energy Bill is delayed so that the implementation date has to be put back by a year, then there will be a knock-on effect on delivery, particularly of offshore wind, making targets for 2020 more difficult to reach. We would strongly urge Parliament to ensure that the Bill can be passed so that any delay to the new RO arrangements can be avoided.
The offshore transmission licensing regime is also the result of a long consultation process, and similarly BWEA would like to see it implemented so that further offshore wind development can be brought forward without delay. We particularly welcome the provisions for property transfer, ie for those early projects that cannot wait for the new system to provide their connection, they can build their own wires safe in the knowledge that these can be 'adopted' by a regulated offshore transmission owner.
Having said this, it is clear that much will change or become clearer in the next 2-3 years regarding the future of offshore wind. In this time, the Strategic Environmental Assessment for 'Round 3' will be complete and the first new sites awarded for development, thus making clear where the next wave of offshore wind will be. The scale of the contribution from offshore wind to our commitments under the EU 2020/20% renewable energy target will have been determined. European policy towards offshore wind will have advanced significantly, with the European Action Plan for the sector promised by the European Commission in December completed, and the activity of the Commission's offshore grid coordinator Georg Adamowitsch, tasked with bringing forward plans for interconnection linking up offshore wind development, well advanced. The first experiences of using the new licensing regime will also have been gained. BWEA therefore feels it is important that the new arrangements for transmission can be looked at again in 2010-11 to ensure that they are working well and are right for the scale and kind of development that will be needed for the rest of the next decade and beyond. It is important to be clear that any change at that point can only be evolutionary, as otherwise potential investors in the early connections might be inhibited from bidding due to uncertainty in the regime.
Further areas the Bill could be amended to address
New legislation in a sector gives opportunities for amendment to bring forward clauses on subjects that the Government has not written into the Bill. The Energy Bill is no exception, and BWEA believes that there would be benefit in addressing at least two more subjects in this Bill. Since BERR will be consulting widely on how the UK can meet its share of the EU 20% target later this year, and consequently bringing forward a comprehensive Renewable Energy Strategy in spring 2009, we believe there will be further opportunity for primary legislation then, if necessary.
Among the key frustrations of the wind industry have been the arrangements for transmission access and charging, and the strategic development of the infrastructure, all of which have unnecessarily delayed connection of new wind generating capacity to the grid. Governance structures for the whole system have failed to bring forward the changes we need. There has to be reform of the system, and swiftly, in order to accelerate the delivery of wind power both on- and offshore. Without significant change to the management of the system, it is difficult to see how the very challenging targets for 2020 can possibly be met. Given the time it takes to develop grid capacity, it is vital that this issue is addressed urgently.
Many have argued, including the Sustainable Development Commission, that a change in Ofgem's guiding legislative remit is required to force change through the governance structure of the network, which the regulator sits at the top of. BWEA would regard a change of this sort as a last resort, as it would inevitably lead to some disruption while the new remit changed the rules and operations of the system. We are working on options that might achieve the same result without the need for legislation, such as strengthened guidance from Government to Ofgem and the rapid implementation of the results of the current governance and transmission access reviews, but are also working with others on potential amendments to the remit.
One change that could strongly promote connection of new renewable capacity would be to institute 'priority access' of such generators to the system. This would clearly require changes to the rules, since it would go against the principle of non-discrimination that Ofgem adheres to. Whether primary legislation is required is not clear. BWEA notes that the draft of the renewable energy directive published by the Commission on the 23rd of January includes strong provisions for priority access and dispatch, and that if these were to remain in the final directive, then there would be clear implications for the UK's system of regulation.
Much has been said regarding the desirability of introducing feed-in tariffs for renewable electricity in the UK. Much of this argument has been based on the facile conclusion that because other countries have feed-in tariffs, and that they have been successful, we must have them too: this ignores the fact that our failure to install as much wind power as Germany or Spain has much more to do with failures of the planning and grid connection systems than our support mechanism. BWEA opposes introduction of a feed-in tariff for large renewable generators due to the inevitable hiatus and disruption that would result from moving to a new system, especially if this takes focus away from tackling the non-economic barriers that are really impeding progress.
This is not to say that feed-in tariffs do not have a role: BWEA believes they are appropriate for small generators, for which the RO is not an appropriate tool for support and where the current policy has been characterised by mismanagement and lack of clarity. There would have to be considerable effort put in to define a sensible dividing line between the feed-in tariff sector and the RO, and the rules that would be required to avoid gaming around this boundary, but BWEA does not regard these as insurmountable obstacles.
We would support an enabling amendment that allows Government to bring forward a system of feed-in tariffs for microgenerators, though since there is no agreed model for how such a system might work, it would inevitably have to be rather vaguely drafted. One option proposed for the UK is that the Non Fossil Purchasing Agency, which was set up to administer the Non Fossil Fuel Obligation contracts, becomes the buying agent, possibly using the surplus funds it has built up by selling NFFO output on the open market. NFPA would sell on the power, with the above-market cost met from the surplus or an additional levy on bills.
 To see BWEA's submissions to the two consultations on this issue, see www.bwea.com/ref/consultation-responses.html
 Lost in Transmission: The role of Ofgem in a changing climate, Sustainable Development Commission, September 2007. (www.sd-commission.org.uk/publications/downloads/SDC_ofgem_report%20(2).pdf)