Memorandum by Renewable Energy Systems
UK and Ireland Ltd
1. Renewable Energy Systems (RES) is a leading
renewable energy company with businesses in Europe, North America
and Australia. Part of the British Sir Robert McAlpine Group of
engineering and construction companies, RES has been at the forefront
of wind energy development since the 1970s. We built our first
wind farm in Cornwall in 1992 (the UK's second project) and since
then have completed more than 2550MW of wind energy capacity worldwide,
including projects in the UK (10% of the UK's installed wind capacity),
Ireland, France, Scandinavia, Portugal and across the United States.
The RES Group has more than 1500MW currently under construction
and a large portfolio in development around the world. RES is
active in a range of renewable energy technologies for on-site
and building-integrated heat and power generation, including biomass
heating, solar (PV and thermal) and ground source hot water, heating
and cooling. Recently the Group launched a sustainable buildings
consultancy, Inbuilt, which provides technical and consulting
excellence in the research, design and delivery of sustainable
built environments.
2. Energy policy—in particular its
sustainability and economics—is a key issue at present,
as we face the twin challenges of climate change and declining
fuel resources, and a consequent rise in conventional energy prices.
We need to see a paradigm shift in economic drivers. The huge
consequences of major climate change and the extremely long term
nature of the investment decisions required cannot be driven effectively
by conventional commercial evaluation. Nevertheless, environmental
challenge is economic opportunity and a shift to a sustainable
energy policy will bring a range of economic, employment and social
benefits at a local, regional and national level. With the price
of oil at record levels and continuing to rise, the specific economics
of renewable energy development can only become more favourable.
Rising fossil fuel prices and improved technology mean that renewable
energy generation is becoming increasingly competitive with conventional
technologies, even without including the subsidies for, or the
external costs of, conventional power generation.
How do and should renewables fit into Britain's
overall energy policy? How does the UK's policy compare with the
United States, Australia, Canada and other EU countries?
3. There are two significant issues driving
the development of renewable energy—climate change and security
of supply. In 2007, RES published two reports—Plugging the
Gap: A survey of world fuel resources and their impact on the
development of wind energy and Global warming: a guide to its
origins and effects. Plugging the Gap showed that while global
energy demand will grow by more than half over the next quarter
of a century, we are now consuming more than three times as much
oil as we discover, resulting in a peak in the next decade and
a gap between supply and demand by 2030 equivalent to five times
the current production of Saudi Arabia. We have just started to
use more gas than we find—by 2030 production will have peaked
and demand will have doubled, resulting in a gap equivalent to
the current production of Europe and the Former Soviet Union.
Coal is abundant and large energy consumers will be self-sufficient
for some time, though by 2050 the world will have consumed 40%
of its coal reserves, with a 10% decline each decade subsequently,
and environmental concerns will continue to constrain its use.
Current reserves of uranium will last 60 years with modest growth
in nuclear generation but in the long-term alternatives would
have to follow if there were substantial nuclear growth. Climate
change is now recognised across the spectrum as a serious issue
and the need to reduce greenhouse gas emissions is a priority.
Responding to these twin challenges means reducing consumption,
reducing fossil fuel based generation and replacing it with sustainable
low-carbon sources.
4. Renewable energy must be at the heart
of the Government's energy policy. The potential for renewable
energy in the UK is significant. Each technology has its own characteristics
and timelines that need to be addressed in a national strategic
plan. The 15% renewable energy target (the UK's share of the EU
20% target by 2020) translates to a 45% target for electricity
-a massive challenge. The government's plan for 2020 must be part
of a much longer term strategic plan for sustainability and must
result in clear policies and instruments to ensure implementation
of the actions required.
5. RES welcomes the Government's commitment
to increase the development of renewable energy generation in
the UK but firm action on a number of issues is required in order
to reach existing targets and to go beyond to the level of emissions
reduction scientists now say is necessary (ie 80% by 2050). The
UK is not on track to meet its 2010 targets for renewable energy
generation and the new EU Renewables Directive requires us to
go even further. We believe that ambitious renewable energy targets
are necessary and, with political will, achievable.
6. Onshore wind is the only technology with
an industry ready and able to deliver the large-scale increase
in generation needed to meet the 2010 target. It is expected to
play a major role in plugging the short-term gap left by gas and
in decarbonising the power sector over the next quarter of a century.
Modem wind turbines are efficient, powerful machines that generate
electricity from a resource that the UK has in abundance. Every
year, projects developed and built by RES in the UK and Ireland
are cutting CO2 emissions by more than 450,000 tonnes, generating
electricity equivalent to the annual needs of around 160,000 households
and, because wind is an indigenous energy resource, contributing
to our national energy security. Wind power has the potential
to bring significant economic and employment benefits for the
country. RES employs more than 200 people in the UK and has a
policy of using local firms for the civil engineering contracts
during the construction phase of our wind farms.
7. Europe is a leader in wind energy technology
and development. The 75GW of wind energy installed in Europe by
2010 is expected to meet one third of the EU's 2010 Kyoto target.
In Europe, the leading wind energy nations are Germany, Spain
and Denmark. In Spain, government targets have increased regularly
in response to its success and currently, about 10% of national
electricity is provided by wind, increasing to 15% by 2010 (26,000GWh
produced in 2007, forecast to increase to around 29,000GWh in
2008). In Germany, a strong Renewable Energy Law has encouraged
a flourishing wind energy industry, with more than 22,000MW installed
capacity at the end of 2007. Germanys renewable energy target
for 2010 under the EU renewables directive is 12.5% of electricity
consumption but this was met and exceeded in 2007, with a share
of 14%. The German government has recently increased its target
for 2020 from 20% to 25-30%.
What are the barriers to greater deployment of
renewable energy? Are there technical limits to the amount of
renewable energy that the UK can support?
8. The renewable energy sector is hindered
from reaching its full potential in the UK by number of continuing
barriers. These are largely institutional rather than technological.
The key issues that need to be addressed are: planning, grid,
aviation, supply chain, skills shortage, and support and research
for less mature technologies.
9. The planning system has not kept pace
with the growth in interest in renewables. It is time-consuming
and unpredictable, making it a lottery for developers large and
small Decision time for planning consents is too long, both at
local planning authority level and at appeal, across all four
UK countries. According to the British Wind Energy Association,
only 5% of wind farm applications are determined within the statutory
16 week period, compared to an average of 70% for all other major
developments.
10. National policy on renewables is pretty
robust and positive, but this is not translated at a local authority
level, for a variety of reasons, including little understanding
of or training in energy issues, misinformation and lack of resources.
This leads to inconsistencies in approach. The government must
be more diligent in monitoring and enforcing the delivery of national
renewables policy on the ground.
11. The Keadby wind farm project, developed
by RES, demonstrates how planning risk for developers is too high.
The 34-turbine, 85MW project proposed on semi-industrial land
near Keadby in North Lincolnshire, will generate power equivalent
to the needs of approximately 38,000 homes every year. RES first
starting surveying the site in 2001 and submitted a planning application
in 2003. North Lincolnshire Council objected to the proposal which
pushed the project to a public inquiry, which eventually took
place in 2007 after significant delay. In February 2008 the Secretary
of State granted consent for the project and construction has
been planned to begin soon, with the project operational and contributing
to national targets by 2010. This project could have been determined
at the end of 2004 at the latest and the delay has cost RES well
in excess of £1 million. More importantly, however, the delay
was a missed opportunity to add to the UK's renewable energy generating
capacity with a low impact, locally-supported project that can
bring much-needed local economic benefits.
12. In fact a Judicial Review application
has recently been made on the Keadby consent. This is likely to
result in further delay as we would naturally be reluctant to
place deposits for turbine orders in the region of £10,000,000
whilst a legal challenge hangs over the consent. We are seeing
an increasing number of consented projects, especially in England,
being delayed either by Section 288 Challenge or Judicial Review.
We say delayed, rather than stopped, because in most cases it
is clear that a delay is the likely outcome as the grounds are
generally weak. We believe Judicial Review and Section 288 Challenge
are being seen by national groups opposed to wind farms as legitimate
tactics in their campaign to stop onshore wind farm development.
13. Another scheme, the 18MW Den Brook wind
farm in Devon, was consented in February 2007, underwent a legal
challenge, which was finally heard and dismissed in March 2008,
but leave to appeal the High Court's decision has been granted
and a date for that is currently set in December 2008.
14. RES generally supports the proposals
in the Government's current Planning Bill to streamline the process
by replacing the current system with granting consents for major
infrastructure of national importance. However, this only applies
to projects of over 50MW (for onshore wind) in England and Wales,
so only 300MW out of the 8000MW of capacity currently in the planning
system is affected and not until after 2010. The success of the
Planning Bill's proposals are, in our view, utterly dependent
on the development and interpretation of a robust set of national
policy statements. We would like to see the Bill's scope increased
to encompass onshore applications below 50MW and all offshore
consents. It is also important that any replacement for Section
106 does not place undue burden on wind farm applications. We
fundamentally object to any proposals to change the planning application
fee structure. Uniquely, wind farm development boundaries are
considerably bigger than the "footprint" of the project
infrastructure. Adopting the preferred fee structure would result
in unacceptably high application fees probably deterring development
and thereby compromising on Government renewable energy targets.
15. The availability of grid capacity in
the UK is a major obstacle to the achievement of renewable energy
targets. We need a modern grid network that can support our ambitions
into the future for low-carbon generation and that has the administrative
processes, strategic planning and investment that is consistent
with the Government's climate change policy.
16. At the moment, even consented projects
that are ready to build and start contributing to the UK's renewable
energy targets are not being connected to the grid. Renewables
are not getting a fair deal in grid access. The Drummuir wind
farm, a project developed by RES, is an example of this. Drummuir
is a 42MW, 21 turbine, wind farm planned for Moray in Scotland.
It was submitted in 2002 and after being turned down by the planning
authority went through a lengthy and costly public inquiry, despite
it being a well-designed, low-impact project in a good location.
In 2006 the project received consent from the Scottish Executive.
However, although we are ready to build this project, we are not
able to go ahead because it is held up in the grid connection
queue.
17. Planning delays in the UK have been
further exacerbated by recent changes in the way the Ministry
of Defence handles wind farm applications. They have recently
started to issue last-minute objections to wind farm proposals
which have previously had letters of "no objection",
giving no time to respond and reducing market confidence as investments
are lost. Again, the barrier here is institutional—there
are technical solutions available to ensure that wind turbines
do not interfere with radar. See also paragraph 23.
18. Over the last few years the cost of
turbines has increased as a result of higher steel prices, pinch
points in the turbine supply chain and soaring global demand for
turbines, resulting in reduced market confidence. In the offshore
wind sector, turbine supply is a key issue—manufacturers
are looking to supply most of their capacity to the onshore market
because offshore is still a higher financial risk.
19. The renewable energy industry faces
an impending skills shortage. This is a critical issue considering
the scale of development needed to meet the 2020 targets and beyond.
There is a shortage of skilled and experienced workers in the
manufacturing, construction and operating sectors, along with
a shortage of graduates with the scientific, technical, commercial
and social knowledge needed to take the industry to the next level.
Initiatives must be put in place at company, sector, governmental
and EU level to educate, train and attract skilled workers to
the industry.
20. Support mechanisms and increased R&D
for energy generating technologies that are currently less market
mature but which will fill the gap in the medium to long term
between supply and rising demand are needed. There is still a
large heat demand that can be met in a sustainable way and we
need to exploit the huge potential for building-integrated and
on-site renewable energy generation.
21. We support the recommendations of the
Renewable Energy Association on policy measures to overcome existing
barriers to—and to implement new support mechanisms for—the
development of a range of renewable heat and electricity generating
technologies. These would include a production tariff to be applied
to metered heat generated from on-site renewable energy installations
and a Feed-in Tariff for microgeneration of electricity.
22. We would also like to see an improved
long-term grant system for installing renewable energy technologies
that is simple, well-publicised and well-resourced and recognition
of the potential for biomass—especially in urban areas.
Are there likely to be technological advances
that would make renewable energy cheaper and viable without Government
support in the future? Should, and how could, policy be designed
to promote such technological advances?
23. The roll out of well developed but not
yet implemented or approved technological solutions to radar interference
will free up many more potential wind farm sites and reduce the
costs of failed applications. Objections to wind farm proposals
on the grounds of aviation or radar issues currently affect ~4.5
GW of projects in planning.
Has Government support been effective in leading
to more renewable energy? What have been the most cost-effective
forams of support in the UK and other countries and what should
the balance be between subsidies, guaranteed prices, quotas, carbon
taxes and other forms of support? Should such support favour any
particular form of renewable energy over the others? For instance,
what are the relative merits of feed-in tariffs versus the UK's
present Renewables Obligation Certificate (ROC) regime?
24. The Renewables Obligation has been relatively
successful as a support mechanism to encourage renewable electricity,
and wind energy in particular, into the market place. While the
capacity of renewably-generated electricity so far installed under
the RO is falling short of that needed to achieve the Government's
2010 target, it is important that the RO remains in place in order
to maintain stability and investor confidence into the future,
particularly with the 2020 targets being set at European level.
25. In our evidence to the Government's
consultation on Reform of the Renewables Obligation in 2007 we
agreed with the need for additional support for the more expensive
renewable energy technologies but cautioned that increasingly
fragile market confidence for onshore wind would be undermined
by changes initially proposed to the RO and concluded that, should
the Government be minded to adopt a banding approach, there should
be no banding down of onshore wind but that additional funding
should be provided. We welcomed the Government's conclusions published
subsequently and agreed with the proposed banding levels, although
cautioned that the levels may not be sufficiently high for some
emerging technologies. We would like to see the RO's life extended
beyond 2027.
26. With regard to the issue of the Renewables
Obligation versus a Feed-in Tariff, we agree with the Government's
conclusion that the RO should not be replaced by a Feed-in Tariff,
although this may be appropriate for microgeneration as a way
to encourage greater uptake by householders, the RO being too
administratively expensive and complex for this sector. While
renewable energy capacity is higher in a number of countries where
the Feed-in Tariff system has been used, this is likely to also
be a consequence of more favourable planning and grid connection
regimes. It would not be beneficial to the UK renewables industry
to change support mechanisms at this stage. A harmonisation of
support mechanisms might be appropriate once Europe has moved
towards a single electricity market.
27. A report by the European Wind Energy
Association of the RE-EXpansion project comparing payment mechanisms
in the EU[116]
concluded that it was too early to draw final conclusions on the
full range of policy options available. Policies based on fixed
tariffs and premiums can be designed to work effectively but introducing
them is not a guarantee of success—the design of the mechanism
and its combination with other measures (grid access and development;
administrative procedures; public acceptance and support) determine
its success.
On top of the costs of building and running the
different types of electricity generators, how much investment
in Britain's transmission and distribution networks will different
renewable energy sources require compared to other forms of generation?
Are the current transmission and distribution systems capable
of managing a large share of intermittent renewable electricity
generation and, if not, how should they be changed? Are the rules
about how we connect capacity to the grid supportive of renewables?
28. The existing electricity infrastructure
is aging and suffers from 30 years of under-investment. Without
network investment and access reform, renewable generation will
remain inhibited. However, the opportunity for modernisation within
a strategy for sustainability is huge.
29. It cannot be left to the market alone
to deliver strategic infrastructure solutions as current private
investment criteria are incompatible with the strategic timescales
of relevance. Such commercial investment criteria would not have
resulted in the London sewage and underground railway systems—strategic
infrastructure often has very significant value beyond its initial
commercial life. Generation and grid infrastructure is currently
privately owned and investment is based on commercial return.
In future, public-private partnerships will be essential for delivering
the scale of new infrastructure required. This presents opportunity
for both. Great care is also needed in the application of discounted
cash flow analysis to very long term high impact issues like avoidance/mitigation
of climate change. Policies need strategic timeframes well beyond
2020 and need mechanisms to enable creation of a flexible and
enduring infrastructure.
30. Investment and operation of the grid
is regulated by Ofgem, with short-term cost-to-the-consumer as
their key metric. This inhibits radical development to access
main centres of renewable resource. Extension of the grid will
result in additional cost to the consumer, hence the reluctance
of Ofgem to commit to the vision, but grid forms only a small
percentage of total electricity cost so should not be a major
constraint on ambition. Ofgem's remit must be rethought specifically
to prioritise sustainability and also to enable large-scale and
very long term strategic investment.
31. The rules about how we connect capacity
to the grid are not supportive but inhibitive of renewables. There
is no priority grid access or dispatch for renewables; development
of the grid is reactive to emerging projects whilst reform of
the operating regime is inhibited by process rigidity. This cannot
be addressed through evolution of existing codes; radical redesign
is needed. Giving priority access for connection and production
to renewable energy capacity means not doing so for centralised
fossil plant. It is essential to overcome resistance from the
affected incumbents. Renewables must have priority grid access
and dispatch. Shared access rights and flexible security-of-supply
rules need to be introduced.
32. Consenting of electricity infrastructure
projects is slow and difficult. The process in England and Scotland
is being radically reformed; a specific aim is better and speedier
decisions on such projects, which is to be welcomed. Consenting
must be strategy-led and development control must enable rather
than impede.
33. Work on developing a long-term infrastructure
plan needs to start now. Government must enable the creation of
that plan and provide the necessary instruments to ensure it becomes
reality. Government must undertake a major education programme
to address the need to change attitudes and create public and
stakeholder buy-in.
34. Today's grid reflects historical not
future need. Renewables must be harnessed where they occur, not
where the grid is now. The grid must be strengthened and extended
and rather than do this piecemeal, strategic planning should identify
and enable long-term, ambitious solutions that have relevance
well beyond the short-term 2020 horizon.
How do the external costs of renewable generation
of electricity—such as concerns in many affected rural areas
that wind farms and extra pylons spoil areas of natural beauty—compare
with those of fossil fuels and nuclear power? How should these
be measured and compared? Is the planning system striking the
right balance between all the different considerations?
35. For our views on the planning system's
effectiveness in balancing the positives and negatives when assessing
renewable energy proposals, specifically onshore wind farms, see
paragraphs 9-14 above.
36. In general, the external costs of renewable
energy generation are less than the external costs of fossil fuels
and nuclear power. They can be mitigated by sensitive design and
development and local consultation and the E IA process already
in place facilitates this. While there are concerns about the
visual impact of wind turbines, our experience is that the greatest
supporters of wind energy are those communities living near an
existing project. Public opinion is favourable towards wind energy
in general. The Eurobarometer opinion survey in January 2007 showed
that 71% of EU citizens were "very positive" towards
the use of wind energy in their country. The popularity of a range
of energy sources was surveyed and they were (in order of popularity
with greatest first): solar energy, wind energy, hydroelectric,
marine, biomass, gas, oil, coal and nuclear.
37. The issue of external costs of different
types of electricity generation is an important one. The European
Commission-funded ExternE study (1998) estimated that the cost
of producing electricity from coal or oil would double and the
costs of electricity production from gas would increase by 30%
if external costs (in the form of damage to the environment and
health) were taken into account. It estimated that these costs
amount to 1-2% of EU GDP or between Euros85billion and Euros170billion,
not including the cost of climate change. The ExternE study gave
the external costs of various energy sources expressed as Eurocent/kWh.
According to the RE-Xpansion analysis, wind power is expected
to avoid external costs of Euros25billion/year by 2020.
How do the costs of generating electricity from
renewables compare to fossil fuel and nuclear generation? What
are the current estimates for the costs of "greener"
fossil fuel generation with carbon capture and storage and how
do these costs compare to renewable generation? What impact do
these various forms of electricity generation have on carbon emissions?
38. Regarding "greener" fossil fuel
generation, in our 2007 survey of world fuel resources (Plugging
the Gap), RES considered the availability of coal over the next
few decades and the role for "clean coal"—a series
of new technologies that aim at reducing the specific emissions
of coal-fired power plants and ultimately eliminating them. The
first step in this strategy is reducing emissions by improving
thermal efficiency through supercritical stream cycles and IGCC.
IGCC also paves the way for Carbon Capture and Storage (CCS),
for which there are several technological options.
39. CCS is currently at an R&D stage
and uncertainties persist as to the potential chemical and physical
interactions of CO2 with the storage medium. No mature technology
exists for CCS today, but coal-rich countries like the US are
investing heavily to develop it and aim at having a demonstration
project in the coming years.
40. According to a DTI (UK) study[117],
CCS costs for a new IGCC plant are estimated at 97 €/tonne
of abated CO2, including the cost of the energy used in the process.
In terms of electricity cost, a carbon-free kWh generated in such
plant would cost 3.9c€ more than one produced by a modem
CCGT. Clearly, CCS will not develop without incentives but a support
scheme will not be easily established, as nuclear generators could
probably claim for similar premiums. However, costs are expected
to be reduced as capture technology improves. Financial returns
from enhanced oil recovery (EOR) could further ease the burden.
If the UK is to meet the EU target that by 2020
15% of energy consumed will come from renewables, will most of
this come from greater use of renewable sources in electricity
generation? If so, why? Should British support for renewables
in other countries be allowed to contribute towards meeting the
target for the UK?
41. In the short-term, onshore and offshore
wind will provide the majority of renewable energy generation
in the UK, as wind power is the most advanced and economic of
the technologies. However, with the right investment triggered
by effective support mechanisms as part of a long-term strategic
plan, other renewable energy technologies—specifically those
to meet the large demand for heat and on-site/buildings-integrated
generation—will play a major in meeting the targets that
must follow the 2020 target. Marine renewables have huge potential
around our coastline and continued support for tidal stream and
wave energy technology development is important.
How would changes in the cost of carbon—under
the European emissions trading scheme—affect the relative
costs of renewables and other sources of energy? Would a more
effective carbon emissions trading scheme remove the need for
special support of renewable energy?
42. A higher price for carbon would be beneficial
for renewables. The ETS should be designed to ensure a stable
and appropriate regulatory framework which gives investors the
confidence they require for long term development plants; create
a level playing field for renewables in comparison with other—often
more polluting—energy technologies ie internalisation of
external costs; take into account all benefits associated with
renewables; allow the renewables sector to receive sufficient
compensation in recognition of those benefits. However, CO2 trading—a
single payment mechanism based on CO2 price—cannot be relied
upon to bring forward renewable energy because the price is too
volatile to promote investment.
16 June 2008
116 Support Schemes for Renewable Energy: A Comparative
Analysis of Payment Mechanisms in the EU, EWEA, May 2005. Back
117
UK Department of Trade and Industry (DTI), "Review of the
Feasibility of Carbon Dioxide Capture and Storage in the UK",
September 2003 Back
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