HC 742 Electricity Market Reform

Memorandum submitted by RSPB (EMR 39)

The RSPB welcomes this opportunity to comment on the Government’s proposal for reform of the electricity market. This response sets out our overall position on EMR and on renewable energy in particular, and highlights our key concerns and recommendations for the reform package.

1 Summary

We believe that the overall aim of EMR should be to decarbonise the electricity sector, reducing average emissions from generation to 50gCO2/kWh by 2030 as recommended by the Climate Change Committee. EMR should also:

· Enshrine sustainability as a guiding principle for the reform package and for energy policy more generally

· Establish an ambitious renewable energy target for beyond 2020

· Prioritise energy savings

· Establish a strong Energy Performance Standard that is reduced over time.

2 The RSPB and the energy sector

Climate change is already affecting birds and wildlife in the UK and globally, and it threatens to drive future biodiversity loss unless urgent action is taken to reduce emissions and keep the world within ‘safe’ levels of climate change. One study published in Nature indicates that climate change could cause up to 35% of species to be committed to extinction by 2050 [1] . The RSPB therefore strongly supports the UK’s greenhouse gas reduction targets and recognise the critical role that renewable energy will play in delivering them as part of a wider package that prioritises energy savings.

The huge amount of new infrastructure needed to decarbonise our energy supply can, however, have a detrimental impact on wildlife in the UK if poorly located and/or designed. The Government has committed to reversing biodiversity decline by 2020. We believe, therefore, that Government has a duty to ensure these targets are met with minimal environmental impact.

The RSPB is unique amongst UK NGOs because we engage with individual applications for renewable and other energy infrastructure across the UK, advising developers how they can minimise the impact of their developments. We will also object to developments when their environmental impacts are likely to be unacceptable. Since 1990, we have placed sustained objections to only 5.7% of wind farm applications.

3 Objectives for electricity market reform

3.1 The overall objective of EMR should be decarbonising the power sector

There is now general consensus that the power sector will need to be near-fully decarbonised by 2030 and able to provide for increases in demand from electrification of transport and heat. We believe that the overriding aim of EMR should be to deliver an average emissions intensity of 50gCO2/kWh by 2030 in the most sustainable way and at reasonable cost to the consumer. This reflects the Climate Change Committee’s advice on the fourth carbon budget and is critical to ensuring the UK remains on target to delivering its commitment of an overall 80% reduction in emissions by 2050.

3.2 An ambitious renewable energy target should be set for 2030

We are concerned that the Redpoint analysis that underpins DECC’s proposals on EMR assumes that renewable energy will deliver 34% of electricity by 2030 in all scenarios. Meeting our 2020 target implies 29% of electricity coming from renewable sources by 2020, so this assumption suggests a significant slow-down in growth for the renewable energy sector in the period 2020-30. Indeed, the only significant differences between the scenarios explored by Redpoint are in the amount of nuclear, CCS and gas CCGT, as well as net costs.

We therefore recommend that an ambitious target is set for 2030 that reflects continued growth in renewable energy throughout the 2020s, and that DECC commission further analysis to explore what further policy support and market conditions may be required to deliver greater growth.

3.3 Energy savings should be prioritised

We note the lack of ambition in and attention to the role of reducing overall energy use in decarbonising the power sector. EMR should have as an objective delivering a market that drives much more ambitious energy savings. As part of the EMR package, we would like to see DECC carry out specific analysis of different energy saving scenarios for the period up until 2030 and develop further policy interventions to ensure the market structure facilitates demand management and energy efficiency measures.

4 EMR and environmental sustainability

We understand and support this Government’s initial focus on the electricity market given the huge levels of capital required to decarbonise our energy system. Investment is, however, only one part of the equation that will deliver the low carbon energy needed to make development sustainable. Equally important is a policy and planning framework that minimises the ecological and environmental impacts of that investment itself, and thereby facilitates deployment and enhances public acceptance.

We are concerned that DECC and CLG have largely ignored this to date, and believe that sustainability should be a ‘guiding principle’ for EMR itself and for energy policy more generally. This reflects the commitment made by the Conservative party in Rebuilding Security that sustainability will be a key objective of conservative energy policy, and the principle of safeguarding the natural environment enshrined in the Liberal Democrat constitution.

4.1 Spatial guidance for renewables

The current approach to deploying renewable energy, established under the previous Government, is market-led in terms of technology choice and locations for new developments. This has led to conflicts over individual developments that could otherwise have been avoided. As an example, the Lewis windfarm proposal was to be sited on an internationally protected area and an intact peatland - an important carbon store. Inevitably the scheme was rejected, but only after years of conflict and millions of pounds wasted in lost investment.

The planning system is not delivering sustainable renewables at the pace required, and the situation appears to be worsening. Evidence from Renewable UK suggests that approval rates at the Local Authority level fell to 53% (by MW) in 2009, relative to 68% in 2008 [1] . The RSPB in concerned that proposed changes to the planning system, such as removal of regional targets for renewable energy and the lack of spatial guidance in the draft energy National Policy Statements, will only exacerbate this situation.

We believe that Government needs to give more strategic direction to the industry to facilitate deployment and minimise the environmental impact of meeting our climate goals. This should act alongside the planning system, which offers a backstop to resolve individual cases. Such an approach will also improve public acceptability by clearly and transparently minimising environmental conflicts.

Strategic direction can be delivered either through market rules or as guidance linked to the planning system. To be delivered through the market, however, would require greater use of centralised instruments. For example, low carbon contracts between Government and a developer could include requirements pertaining to the environmental sensitivity of the site being developed. We understand, however, that this is not the direction in which EMR is being taken, and are therefore calling on DECC, CLG and Defra to develop a system that offers onshore wind developers spatial guidance on where development would be most environmentally suitable. Such an approach could then be applied at the Local Authority or group of Local Authority level, and could be rolled out to other technologies as required in the future.

4.2 Accounting for sustainability in subsidy schemes

The technology neutral principle in the Renewables Obligation has also led to undesirable environmental outcomes. For example, the generous banding of bioliquids has brought forward proposals for electricity generation based on biofuels made from palm oil and jatropha. We are also aware of over thirty proposals for large-scale biomass power plant with a combined capacity of 3.9GW and an annual wood demand of approximately 23 million oven-dried tonnes. This compares to a total of 9.3 millions tonnes of wood harvested in the UK in 2010 [1] . We would therefore like to see technology premia in the RO and any future support schemes banded to reflect sustainability, with the least sustainable technologies receiving less support and the most sustainable receiving more.

5 An Emission Performance Standard

We support the proposal for an EPS of 300g CO2/kWh that is reduced to 100g CO2/kWh by 2025. An EPS at the level proposed by DECC is inadequate, and the proposed grandfathering provision sends a message that unabated gas and partially abated coal will continue to have a role to play into the future, which is incompatible with our longer-term emission targets.

An EPS that is progressively reduced over time according to a clear timetable is not simply a backstop. It provides certainty to the industry by sending a clear signal to developers as to what kind of plant will be acceptable in the future, directing investment and innovation. It also prevents the potential lock-in to unabated gas, to which Government’s current proposal risks leading. Finally, as noted in the ECC Committee’s 2010 report on an EPS, a strong EPS would send an important signal internationally, positioning the UK as a leader on climate change and encouraging other countries to follow suit. A weak EPS, as currently proposed, would have the opposite effect.

6 A coordinated North Sea grid and interconnections with other EU Member States

EMR should explicitly seek to deliver a coordinated offshore grid in the North Sea. Under current market arrangements every offshore windfarm has its own onshore connection(s). A coordinated grid that links clusters of offshore windfarms to the onshore grid would minimise the total number of onshore grid connections required. This will have less overall environmental impact and will be cheaper for consumers.

EMR should also seek to deliver greater interconnection with grids in continental Europe. This was identified in a major study by the European Climate Foundation [1] as key to decarbonising the European power sector, as it allows the integration and balancing of geographically dispersed renewable energy resources. By enabling international trade in electricity this should reduce costs to consumers and improve energy security. Furthermore, it reduces the overall capacity of renewables required to meet targets across Europe, and, by consequence, the environmental impact.