CHAPTER 7: RECOMMENDATIONS AND CONCLUSIONS
232. We cannot consider renewable energy in isolation
from the rest of the UK energy system and we support measures
to include nuclear plants as an essential element of the UK's
energy mix (paragraph 74).
233. The cost of electricity from onshore wind
farms at good locations would only be comparable with that from
fossil fuel generators when the prices of oil, gas and coal are
very high or allowance is made for the price imposed for carbon
emissions permits (effectively a tax). It is more expensive than
nuclear generated power—base cost 7 pence per kWh, as opposed
to around 4 pence per kWh for the other technologies. Offshore
wind, biomass, wave and tidal power are even more expensive. And
these estimates exclude the additional costs of integrating more
renewable generation into Britain's electricity grid (paragraph
74).
234. Future developments depend upon many variable
factors But it seems clear that the base costs of generation of
electricity from onshore wind are likely to remain considerably
higher than those of fossil or nuclear generation and that costs
of generation of marine or solar renewable electricity are higher
still (paragraph 85). We hope that the Energy Technologies Institute's
work will yield technological advance and lower costs. The Government
should consider, perhaps in collaboration with others, offering
a substantial annual prize for the best technological contribution
to renewable energy development (paragraph 93).
235. Although their declared purpose is to improve
the environment, it is clear that renewable energy installations
can also have adverse environmental impacts which the Government
should bear in mind as it weighs the benefits and costs of expansion
of renewable generation (paragraph 96).
236. Fluctuations in wind speed lead to short
term changes in electricity output from wind farms. Greater use
of wind power and other intermittent renewable sources therefore
requires more backup generation capacity to respond very quickly
to, for example, reductions in the output of wind turbines when
the wind drops. But the technical challenges and costs of backup
generation on a scale large enough to balance an electricity system
with a high proportion of intermittent renewable generation are
still uncertain. Whereas the highest share of intermittent renewable
electricity now being generated in Europe is 15% in Denmark, the
UK is expected to reach a share of some 30%-40%. We recommend
that the Government should ensure that further work is carried
out to clarify the costs and encourage development of technical
solutions to deal with intermittency (paragraph 104).
237. The need to part-load conventional plant
to balance the fluctuations in wind output does not have a significant
impact on the net carbon savings from wind generation (paragraph
105).
238. If some 30 GW of additional (Ev Q 487) renewable
capacity were required to meet the EU's 2020 target for the UK
a further 14-19 GW of new fossil fuel and nuclear capacity will
still be needed to replace plants due to close and meet new demand.
The total new installed electricity generating capacity required
by 2020 would thus be roughly double the level needed if renewable
generation were not expanded (paragraph 111). Investment in renewable
generation capacity will therefore largely be in addition to,
rather than a replacement for, the massive investment in fossil-fuel
and nuclear plant required to replace the many power stations
scheduled for closure by 2020. The scale and urgency of the investment
required is formidable, as is the cost (paragraph 112).
239. A breakthrough in cost-effective electricity
storage technology would help solve the problem of intermittency
and remove a major stumbling block to wider use of renewable energy
in the longer term. However, no evidence we received persuaded
us that advances in storage technology would become available
in time materially to affect the UK's generating requirements
up to 2020. We recommend that the Government should as a matter
of urgency encourage more research, development and demonstration
in energy storage technologies (paragraph 117).
240. Our calculations suggest that the total
extra annual cost of increasing the share of renewables in electricity
generation from 6% to 34% in 2020 would be £6.8 billion or
an extra 38%—the equivalent of an extra £80 a year
for the average household. Emissions of carbon dioxide would be
reduced by 52 million tonnes a year—in 2007, the UK's emissions
were 544 million tonnes. This implies that the additional cost
is about £130 per tonne of carbon dioxide emissions avoided
(paragraph 128).
241. Ofgem is required to use competition wherever
appropriate. We are concerned that the use of competitive tenders
implies a piecemeal approach to building the networks of wires
and cables required to connect offshore wind farms to the electricity
grid, and that as a result the programme could become overly complex
and costly. We recommend that Ofgem implements the new system
in a way that allows a coordinated approach for organising grid
connections to offshore wind farms (paragraph 131).
242. We welcome measures to organise better the
queue of renewable generation projects awaiting connection to
the electricity grid. They should reduce delays in connecting
viable generation projects and push back schemes unlikely to get
off the ground (paragraph 134).
243. We consider that the current system of Transmission
Use of System charges sends broadly appropriate signals of the
costs of locating generators at different points on the system
(paragraph 139).
244. Greater interconnector capacity with the
Continent would reduce, but not solve, the problems of intermittent
renewable generation (paragraph 141).
245. Harnessing renewable sources of heat is
often cheaper than for electricity generation and offers a larger
target area, as heat accounts for double the final energy demand
of electricity. There is no intermittency problem with renewable
heat. We recommend that the Government should lay at least as
much emphasis on encouraging the development and use of renewable
heat as on renewable electricity generation (paragraph 163).
246. We share the concerns raised in the Gallagher
Review about existing biofuels. Steps should be taken towards
developing second generation bio-fuels as soon as possible. Until
the costs of carbon emissions reduction through biofuels come
down we recommend that the Government should not seek to increase
further the use of biofuels (paragraph 173).
247. It is clear that, although the cost of the
technology for carbon capture and storage (if and when it becomes
a practical possibility) is inevitably highly speculative, it
will always be more expensive than large-scale carbon-based energy
without CCS (paragraph 177).
248. It seems clear there would be little investment
in renewable energy without substantial Government support and
that a 15% target would not be met without it (paragraph 183).
249. We note the evidence that the cost per kWh
of renewable electricity supported by the Renewables Obligation
has been significantly higher than the amounts paid via feed-in
tariffs abroad, and that much of the excess has been due to other
differences in the environment for renewable generation, particularly
in the planning system. However, given investors' need for a predictable
framework, it seems right to retain the Renewables Obligation,
if it is desired to continue increasing generation of electricity
from renewable sources (paragraph 189).
250. We are not persuaded that the wish of concerned
citizens to make their own contribution to emissions reduction
is an adequate justification for a public subsidy for micro-generation
(paragraph 198).
251. The returns from micro-generated electricity
look too small and uneconomic for the Government to support. But
the gains from households using micro-generated heat look much
more promising. Government policy should focus instead on households
generating renewable heat and on schemes that use renewable heat
on a larger scale, such as those covering a housing development,
or group of public buildings (paragraph 204).
252. On the evidence submitted to us, renewable
electricity is clearly more expensive than fossil fuel-fired and
nuclear generation and leads to higher energy bills for consumers
and businesses. We estimate that a household which consumes the
average amount of electricity will have to pay in 2020 about £80
extra a year. The Government will need to take higher costs on
board in framing its policies towards fuel poverty, noting the
high correlation between fuel poverty and poorly-insulated homes
(paragraph 208).
253. We call on the Government to look afresh
at the UK's research effort into renewables and to consider what
more might be done, in a global context, to promote more, and
more focussed, research across a range of technologies leading
to new, effective and economical ways to reduce carbon emissions
(paragraph 213).
254. We recognise that power companies need a
streamlined planning system to approve or reject projects more
quickly. But local and national concerns about environmental degradation
must also be addressed. It is important to ensure that the planning
system adequately assesses the costs to local communities and
the balance between national priorities and local decision-making.
The Government should also examine how far local communities share
in the economic benefits created by wind farm deployment and other
renewable projects (paragraph 220).
255. We endorse the Government's objective of
ensuring a secure, reliable and affordable supply of energy (paragraph
225).
256. The Government is right in stating that
a portfolio of policies is needed to achieve this objective, if
we are also to bring about reduced carbon emissions. Against a
background of developing technologies and uncertain costs, the
Government will need to give a firm lead, with clear priorities
and realistic objectives, while maintaining the stable framework
needed by investors in the context of the long lead times needed
by many energy projects (paragraph 226).
257. We recognise that the Government has committed
the UK to contribute to the EU target of 20% renewable energy
by 2020 and that a target of 15% for this country is envisaged.
But the bulk of the evidence presented to us casts doubt whether,
under current policies and with current resources, it will be
feasible to increase the share of renewable energy so much in
the UK over the time available. This is especially so, as most
of the growth is expected to occur in power generation, which
represents only a fifth of the UK's energy use, and that this
growth will be largely in addition to the substantial replacement
programme of old conventional and nuclear plant that has to take
place over the same time period (paragraph 228).
258. We are also concerned that determination
to meet the target may lead to an over-emphasis on promoting short-term
options, simply because they are available, rather than because
they offer the most effective and economical means of reducing
carbon dioxide emissions over the longer term (paragraph 229).
259. We have a particular concern over the prospective
role of wind generated and other intermittent sources of electricity
in the UK, in the absence of a break-through in electricity storage
technology or the integration of the UK grid with that of continental
Europe. Wind generation offers the most readily available short-term
enhancement in renewable electricity and its base cost is relatively
cheap. Yet the evidence presented to us implies that the full
costs of wind generation (allowing for intermittency, back-up
conventional plant and grid connection), although declining over
time, remain significantly higher than those of conventional or
nuclear generation (even before allowing for support costs and
the environmental impacts of wind farms). Furthermore, the evidence
suggests that the capacity credit of wind power (its probable
power output at the time of need) is very low; so it cannot be
relied upon to meet peak demand. Thus wind generation needs to
be viewed largely as additional capacity to that which will need
to be provided, in any event, by more reliable means (paragraph
230).
260. We consider that the Government, if it pursues
a renewable energy target in addition to its targets for reducing
carbon dioxide emissions across the board, should prioritise the
development and promotion of the other effective and economic
options, both to bring down carbon dioxide emissions and to achieve
security of electricity supply. It will be important to ensure
that incentives to promote those renewables which offer only intermittent
supply do not divert attention from, and deter investment in,
other low-carbon generation options and thereby risk power shortages.
So far as reliability is concerned, the best options amongst renewable
sources of generation are tidal barrage and biomass, which are
problematic for other reasons, and hydro power, which is not,
but is already near the limit of its potential in the UK. The
most reliable low-carbon alternative to renewables is nuclear
power (together with conventional fossil fuel generation with
carbon capture and storage, if and when that becomes available)
(paragraph 231).
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