THE ECONOMICS OF RENEWABLE ENERGY
CHAPTER 1: INTRODUCTION
1. The Government is committed to a substantial
increase in renewable energy over the next decade as a major part
of its programme to reduce carbon emissions. Currently 1.8% of
energy used in Britain comes from renewable sources—the
Government aims to increase this to 15% by 2020 in line with European
Commission proposals.[1]
Greater use of renewables is expected to increase energy costs.
But the cost of non-renewable sources of energy can also rise
as recent volatility of oil and gas prices shows.
2. We decided it would be timely to examine the
economics of renewable energy. The Committee's starting point
is the Government's wish to reduce carbon emissions—this
report does not discuss whether or how far it is necessary to
do so. An earlier report by the Committee on climate change examined
the issue in 2005.[2]
3. Chapter 2 gives a brief overview of Britain's
energy system and outlines the Government's energy policy objectives.
4. Chapter 3 examines the different renewable
technologies used to generate electricity. Electricity generation
is often cited as the sector with the most potential for increasing
the use of renewable sources, although it represents only around
20% of UK final energy consumption. The chapter compares the generation
costs from different renewable sources with each other and contrasts
them with fossil fuel-fired plants and nuclear power.
5. In Chapter 4, we move from power generation
to the electricity system as a whole. We explore the issues involved
in balancing the irregular supply from renewable generators which
depend on weather conditions against the continuous demand for
electricity. We examine the costs of connecting renewable generators
to the electricity grid which carries power to homes and businesses
across the country.
6. In Chapter 5, we examine the potential for
renewable sources of heat and of transport fuels—areas often
overlooked, although they represent roughly 80% of UK energy consumption.
We look at the options in these sectors and compare the costs
to those of renewable electricity generation.
7. Chapter 6 looks at the key policy issues surrounding
renewable energy, such as how much support, and of what kind,
the sector should get. We consider the impact of renewable policy
on fuel poverty, the planning system for renewable energy, and
whether the 15% target proposed by the European Commission is
achievable.
8. To keep the scope of this report manageable,
we decided not to cover energy efficiency. It remains the case,
however, that improvements to the way in which we use energy may
be among the most cost-effective ways to reduce carbon emissions.
We emphasise that nothing in this Report should be taken to
imply that we do not recognise the critical importance
of energy efficiency measures.
9. The geographical focus of the Report is the
UK and the EU. The electricity system in Northern Ireland is run
separately from that in Great Britain; almost all the evidence
we received related to the system in Great Britain. As witnesses
noted, the impact on carbon emissions of measures taken in the
UK on its own (or, indeed, even in Europe as a whole) is likely
to be minimal unless similar policies are adopted elsewhere.
1 The European Commission has set a binding target
that 20% of the EU's energy consumption must come from renewable
sources by 2020. However, the individual member states' contributions
to this target are still only proposals and are a matter of dispute.
For the United Kingdom, the European Commission has proposed that
15% of its energy come from renewable sources. Back
2
House of Lords Select Committee on Economic Affairs, 2nd Report
(2005-06), The Economics of Climate Change, (HL 12) Back
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