Memorandum by the Town and Country Planning
Association
1. ABOUT THE
TCPA
1.1 The Town and Country Planning Association
(TCPA) is an independent charity working to improve the art and
science of town and country planning. The TCPA puts social justice
and the environment at the heart of policy debate and inspires
government, industry and campaigners to take a fresh perspective
on major issues, including planning policy, housing, regeneration
and climate change. Our objectives are to:
— Secure a decent, well designed home
for everyone, in a human-scale environment combining the best
features of town and country.
— Empower people and communities to
influence decisions that affect them.
— Improve the planning system in accordance
with the principles of sustainable development.
1.2 The TCPA's field of expertise lies mainly
in the planning, housing, development and environmental fields,
rather than the economics of renewable energy (RE). However, the
TCPA consider the provision of measures to support the widespread
deployment of RE to be largely dependent upon an effective and
responsive planning system. We work closely with industry experts
to inform the Association's policy justifications and feasibility
of proposals. Our comprehensive publication database, including
our climate change and sustainable energy policy documents, best
practice guides and research are available for your reference
on our website at www.tcpa.org.uk.
2. SUMMARY OF
TCPA'S VIEWS
2.1 The TCPA welcomes this inquiry into
the costs and benefits of RE. It is essential that we meet the
challenge of reducing our reliance on fossil fuels by improving
the sustainability of large-scale power stations and focusing
on the role that smaller scale decentralised energy and RE generation
can play. A step change is needed in how we generate and supply
electricity, making a transition to decentralised energy and power
based on low and zero carbon technologies.
2.2 The TCPA believes that the UK urgently
needs major and rapid expansion of RE if we are to meet our EU
commitment of 20% RE by 2020. The Government needs a radical shift
in energy policy, with the introduction of a feed-in tariff scheme,
to rapidly accelerate deployment of RE at lower cost. A feed-in
tariff based scheme would mobilise all RE options (not just those
at near commercial stage such as large-scale wind, waste to energy
and fuel crops), producing a diverse RE mix and reducing our dependency
on conventional energy over time.
QUESTIONS 1-4
2.3 In order to answer questions 1 to 4
it is important to understand that the barriers and types of policy
support required for renewable energy (RE) depends at what stage
of the development the RE technology is along the innovation chain.
2.4 The stages of innovation [Research and
Development (R&D)  Demonstration
Pre-commercial
Supported Commercial Commercial]
are illustrated in the conceptual s-curve graph below.
2.5 Historically in the UK Government has
used market based models to drive innovation, however with the
emphasis on obligations and fiscal incentives rather than public
procurement and capital expenditure there is a vacuum in investment
between the demonstration and supported commercial stages. As
we have seen with the deployment of large-scale wind, energy from
waste and energy crops in the UK, this type of economic model
effectively picks near market options.
2.6 The right mix of policies is essential.
Innovation is driving forward, however working with and harnessing
liberalised markets requires long term R&D and incentives
for innovation.
Table 1 describes the measures required at different
stages along the innovation chain.
Table 1
|
| Measure | Description
| Technology stages |
|
| Public funding for R&D | Direct state expenditure in public and private sector research. Justified on standard economic grounds, as the social returns to innovation exceed the private returns. UK activity through Carbon Trust, Research Councils and BERR programmes.
| R&D |
| Public procurement | Preferential public procurement policies for renewable technologies may be used to develop initial niche markets. This measure has had limited deployment in the UK.
| From demonstration onwards |
| Direct state subsidy | Targeting either capital investment in renewable plant, or output where generators and/or suppliers receive a subsidy based upon the quantity of renewable energy supplied. Few countries continue to use public funds for direct subsidy of renewables.
| Most common at early post R&D—demonstration and pre-commercial stages
|
Fiscal incentives
(i) electricity |
May either target capital investment in plant eg through accelerated depreciation on investment, or be based on the quantity of electricity supplied/ purchased from renewable generators. In the US they use a dedicated tax credit, in the UK and Denmark a rebate of carbon/ energy taxes.
| Mostly used at pre and supported commercial stages.
Measures targeted to capital costs may be of use at demo stage
|
Fiscal incentives
(ii) fuels and efficiency
| Fuel duty relief for biofuels and vehicle excise duty in the UK graded according to the vehicles emissions and engine size.
| Supported commercial |
| Regulation | Building regulations and planning guidance eg Code for Sustainable Homes and supplement to Planning Policy Statement 1 on Planning and Climate Change.
| Pre and supported commercial—also to encourage take-up at commercial stage
|
| Tariff schemes | |
|
| Statutory obligations on electricity suppliers—this type of mechanism can take substantially different forms
| Feed-in tariffs—where there is a fixed price and an obligation on utilities to accept all renewable generated power, provided technical criteria are met. Electricity producers are paid a guaranteed price, fixed by technology type—set by regulation and most often borne by the utility and passed on to consumers
Competitive bidding or non fossil fuel obligation "NFFO" type schemes. Renewable energy developers are invited to bid for contracts to sell electricity at a fixed premium price for a fixed term. The premium price emerges from a competitive bidding process—in the UK this was funded by a levy on conventional generation.
Renewable Portfolio Standards or Obligation based schemes. The Renewable Obligation, pioneered in the UK, places a mandatory requirement for UK electricity suppliers to source a growing percentage of electricity from eligible renewable generation capacity (currently increasing to 15% by 2015).
| Supported commercial |
|
1. 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?
2.7 The drivers in the UK to move towards renewables
have been three-fold:
1. tackling climate change by reducing carbon dioxide (CO2)
emissions;
2. ensuring secure, clean and affordable energy for all to
alleviate fuel poverty; and
3. providing a diverse and secure energy mix as we become
increasingly dependent on imported fuel.
2.8 Responding at the national level the Government has
set out the following measures:
— A probable and legally binding commitment to reducing
CO2 emissions by 60% against 1990 levels by 2050 (the TCPA supports
that the Government is considering raising the current commitment
of a 60% reduction to 80%, to be delivered through the forthcoming
Climate Change Act).
— An aspiration for 20% of our electricity to come
from renewable sources by 2020.
— Obligations and fiscal incentives such as the
Renewables Obligation.
— Building regulations to require zero carbon new
homes by 2016, zero carbon schools by 2016 and non-domestic buildings
by 2019.
2.9 European Union leaders have agreed on a binding target
of 20% of EU energy consumption to come from renewable sources
by 2020.[164]
2.10 As illustrated in Table 1 within the UK's overall
energy policy renewables require policy support at all stages
of the innovation chain. For the necessary reductions in CO2 emissions
to be made, with a greater deployment of RE, further investment
(capital expenditure, public procurement and fiscal incentives)
needs to be introduced.
2. What are the barriers to greater deployment of renewable
energy? Are there technical limits to the amount of renewable
energy that the UK can absorb?
2.11 Barriers:
— commercial competition: barriers faced
by new technologies competing with mature technologies, such as
conventional power station (specifically undeveloped infrastructure
and lack of economies of scale);
— failure of the market to value the public benefits
of renewables: Employment, fuel diversity, price stability, and
other indirect economic benefits of renewables also accrue to
society as a whole; and
— market barriers: such as inadequate information
about consumer choice, institutional barriers, lack of access
to capital (small scale RE often incur high transaction costs
for making small purchases).
2.12 A clear, stable and long-term policy framework is
necessary to establish investor confidence in new energy infrastructure.
2.13 National Grid has worked hard with the renewables
industry and Government to reduce the barriers to grid connections.
However, despite this activity, further improvements in network
capacity and availability should be targeted.
3. 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?
2.14 The Renewable Obligation (RO), discussed in further
detail in question 4, has and continues to provide support for
near-market technologies. The TCPA supports continuation of the
RO. However, the RO was not designed to deliver targeted support
to emerging technologies and is not the right means of achieving
this policy goal.
2.15 Emerging technologies, such as marine energy projects,
require targeted financial support in the demonstration and deployment
phase.
4. Has Government support been effective in leading to
more renewable energy? What have been the most cost-effective
forms 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?
2.16 The graph below illustrates the rationale for the
Government adopting a Renewables Obligation Certificate (ROC)
regime rather than a feed-in tariff scheme. The market mechanism
works upon the theory that the RO would create an RE market based
upon high deployment and low price.
2.17 While the RO has been a successful market mechanism
in the deployment of near commercial technologies in the UK (large-scale
wind, energy from waste and energy crops) it has not supported
other technologies, nor has it led to the desired rate of deployment.
2.18 The UK urgently needs major and rapid expansion
of RE to meet our EU commitment of 20% RE by 2020. The TCPA believe
that a feed-in tariff policy, successful in Germany and now being
introduced in several Mediterranean countries—Spain, Portugal
and Italy—should be included in legislation for the UK to
rapidly accelerate deployment of RE at lower cost. A feed-in tariff
system would mobilise all RE options (not just those at near commercial
stage mentioned above), producing a diverse RE mix and reducing
our dependency on conventional energy over time.
2.19 By guaranteeing a long-term fixed price to be paid
to electricity generators and giving priority access to the grid
for the electricity they produce, 10 times more wind and 200 times
more solar power has been installed in Germany[165]
than in the UK. This clearly demonstrates that the feed-in tariff
policy is established, effective and proven.
5. 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?
2.20 The TCPA's expertise has not focused on transmission
and distribution networks to date, however the Association believe
that RE must be afforded the scope to develop on the existing
distribution infrastructure without facing distorting network
charging arrangements and without artificial cost pressures.
2.21 Private networks can provide a valuable local solution
for on-site and near-site RE, however for back-up and larger-scale
RE there will need to be access to mainstream existing networks.
2.22 A question that has recently arisen is whether permitting
a monopoly for on-site energy provision contravenes European law.
Current legislation in the UK allows an exemption for a monopoly
for on-site provision for developments of less than 1MW (roughly
1,000 homes). However a recent ruling by the European Court of
Justice involving Leipzig Airport in Germany, which permits a
monopoly for its on-site generation, has found that the bar to
third party operators in this particular case is contrary to European
law.[166] The UK energy
regulator Ofgem and the DBERR have recently conducted a consultation
into decentralised energy and are now reviewing the German case—the
implications of which may reform the UK conditions for on-site
connection and hold back the growth of the energy supply company
(ESCo) market and level six of the Code for Sustainable Homes,
which allow for on-site energy supplies that are exempt from UK
competition law.
6. 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?
2.23 Placing a social cost to society of the merits of
RE versus conventional power stations is subjective. However,
if considering the cost of runaway climate change to society then
the external costs of RE are minimal in comparison. The specific
location of any power station should be decided according to the
planning system.
2.24 Planning Policy Statements (PPS) set out Government
policy on a range of planning issues. Of particular relevance
to RE are PPS1 and PPS22. A working-draft best practice guidance
to the supplement to PPS1 on Planning and Climate Change[167]
has recently been published. It sets out core planning objectives
and details how policy and decision-making planning can promote
low-carbon energy generation at the local scale. PPS22 describes
how planning should be used to deliver RE.
2.25 Community involvement in planning for sustainable
energy, whether RE or conventional power generation, can help
foster support for, and improve the quality of development. It
can raise awareness of the need for sustainable energy and help
contribute to actual project delivery—the TCPA believe that
is therefore crucial that communities and other stakeholders are
there from the beginning.
2.26 To help developers and local authorities to start
planning for communities powered by low and zero carbon technologies
the TCPA, in partnership with the Combined Heat and Power Association
(CHPA), have recently published "community energy: urban
planning for a low carbon future".[168]
Complimentary to the PPS1 best practice guide it highlights how
local government can use planning and enabling mechanisms to deliver
low-carbon local energy by working with strategic partners.
2.27 Planning is often perceived as a barrier to RE,
however to address concerns about the timeliness of the planning
process local authorities need far greater investment in resources
and training.
7. 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?
2.28 The TCPA's expertise has not focused on the costs
of generating RE compared to conventional power generation to
date and therefore we will not be answering this question.
8. How do the costs and benefits of renewable electricity
generation compare to renewables in the other key forms of energy
consumption—transport and heating?
2.29 The TCPA believe that this is not an either/or situation—decarbonising
transport and heat is as essential as decarbonising electricity.
2.30 Nearly half of the UK's carbon dioxide emissions
come from buildings, a quarter of these from our homes. When transport
is factored in it becomes clear that energy demand and supply
are heavily influenced by the built environment.
9. 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?
2.31 The TCPA's expertise has not focused on emissions
trading to date and therefore we will not be answering this question.
10. 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?
2.32 The TCPA's expertise has not focused on emissions
trading to date and therefore we will not be answering this question.
11. What are the costs and benefits of the present generation
of biofuels? Will there be a second generation of biofuels and,
if so, what are the estimated costs? What are, or are likely to
be, the carbon emission impacts of first and second generation
biofuels, and what are the other relevant environmental effects?
2.33 The TCPA's expertise has not focused on biofuels
to date and therefore we will not be answering this question.
June 2008
164
http://www.defra.gov.uk/news/latest/2007/climate-0309.htm Back
165
http://www.guardian.co.uk/business/2007/jul/23/germany.greenbusiness Back
166
Judges at the European Court of Justice at Strasbourg ruled in
May 2008 that an on-site energy provision arrangement in Germany,
which permits a monopoly when the energy supply is "located
on a geographically connected operating zone", contravenes
directive 2003/54. The directive ensures an open energy market
and national laws are only able to "derogate" from the
principle on certain, unrelated circumstances. Back
167
http://www.communities.gov.uk/planningandbuilding/planning/planningpolicyguidance/planningpolicystatements/planningpolicystatements/ppsclimatechange/practiceguidance/ Back
168
"community energy: urban planning for a low carbon future"
http://www.tcpa.org.uk/press_files/pressreleases_2008/20080331_CEG.pdf Back
| 
