Select Committee on European Union Twenty-Seventh Report


Chapter 3: Meeting the Target

The UK's target

45.  The draft renewables Directive would set the UK a target of 15% of its final energy consumption to come from renewable sources by 2020. In 2005, the UK produced only 1.3% of final energy from renewables. The only Member States to produce less were Malta and Luxembourg (see table 1). The Member States' targets were determined using a methodology that included a flat rate increase in renewables for each Member State of 5.5% and an additional increase based on each Member State's GDP per head[21]. A cap was applied to prevent any Member State being required to deliver over 50% of its energy mix from renewables.

46.  Although 15% is not the highest target assigned to any Member State, the UK has the largest percentage point increase to achieve. Sweden, for example, will be committed to achieving 49% but in 2005 it was already producing 39.8% of its energy renewably. Other Member States have been assigned challenging targets. Luxembourg, for example, must increase its renewables level from 0.9% in 2005 to 11%. Denmark, Ireland, Germany and France all have been set percentage point increases close to the UK's.

TABLE 1

National renewable targets[22]
Share of energy from renewable sources in final consumption of energy, 2005 Target for share of energy from renewable sources in final consumption of energy, 2020
Belgium
2.2%
13%
Bulgaria
9.4%
16%
The Czech Republic  
6.1%
13%
Denmark
17.0%
30%
Germany
5.8%
18%
Estonia
18.0%
25%
Ireland
3.1%
16%
Greece
6.9%
18%
Spain
8.7%
20%
France
10.3%
23%
Italy
5.2%
17%
Cyprus
2.9%
13%
Latvia
34.9%
42%
Lithuania
15.0%
23%
Luxembourg
0.9%
11%
Hungary
4.3%
13%
Malta
0.0%
10%
The Netherlands
2.4%
14%
Austria
23.3%
34%
Poland
7.2%
15%
Portugal
20.5%
31%
Romania
17.8%
24%
Slovenia
16.0%
25%
The Slovak Republic
6.7%
14%
Finland
28.5%
38%
Sweden
39.8%
49%
United Kingdom
1.3%
15%

47.  Currently, the UK's final energy use is split into around 41% of energy used for heating and cooling, 37% for transport and 22% for electricity generation (see appendix 7). Whereas earlier legislation specified that renewables should be deployed through the electricity sector, the draft Directive would include a mandatory 10% target for renewable transport energy but in other respects leave Member States free to encourage renewables in any of these sectors.

48.  It seems likely that the electricity sector will be used to provide the bulk of the UK's renewables. As outlined above, the Government have published a consultation into how best to achieve the 15% target and what contribution towards the target each energy sector might make. The UK's level of renewable heat is currently very low (around 0.6% of heating and cooling energy comes from renewable sources) and the mandatory 10% renewable transport energy aspect of the package is already contentious, largely because there is debate about the sustainability of biofuel crops.

FIGURE 1

UK renewables use in 2006

Electricity and heat figures from UK Renewable Energy Strategy Consultation document. Figure for renewable transport energy from HMRC Hydrocarbon Oils Bulletin, July 2008.

49.  The Government have estimated that at least 32% of electricity will need to come from renewable sources in order to meet the overall 15% target. Other witnesses estimated 40% (British Energy p 183, Ofgem p 70, Business Council for Sustainable Energy UK p 254). In 2006, only 4.55% of electricity generation was renewable. In the UK Renewable Energy Strategy consultation, the Government have estimated that meeting the target will require an extra 30GW of renewable electricity generating capacity.

Energy efficiency and energy saving

50.  For some witnesses energy efficiency was "absolutely central" to meeting the renewables target (Eluned Morgan MEP Q 361). As the target is expressed as a percentage, reducing energy demand was a crucial first step to meeting the 15% target (Centre for Sustainable Energy Q 220 and UKERC p 264).

51.  The UK Energy Research Centre (UKERC) have estimated that if "aggressive demand reduction policies" were put in place then around a fifth of the 15% target could be met without additional renewable energy generation (p 267).

52.  The UK Renewable Energy Strategy consultation argues that energy efficiency measures can be a cheaper way of achieving emissions cuts than building new renewable generation. These efficiency measures must be, therefore, the starting point for the UK's energy policy. Although the consultation document includes some details about energy efficiency policies, the Government expect to consult further on energy efficiency in the autumn.

53.  The Commission said that the feasibility studies for the EU 20% target took account of demand reduction. Hans van-Steen of Directorate-General Energy and Transport described the renewables target as a method of "stimulating efforts on energy efficiency" and said that without effective demand reduction it would be very hard to meet the 20% target (Q 426).

54.  In its conclusions, the spring 2007 European Council committed the EU to reducing its energy use by 20% by 2020[23]. This was to be done using the provisions for National Energy Efficiency Action Plans contained in the Directive on energy end-use efficiency and energy services [24]. This Directive proposed an indicative, non-binding national energy savings target of 9% by 2016 for each Member State. In its Energy Efficiency Action Plan submitted to the Commission in 2007[25], the Government estimated that current and announced measures, if sustained, would achieve a reduction in energy use of 18% by 2016 (p 5). This seems to us optimistic on current policies.

55.  To achieve the 15% target efficiently it is sensible to work to lower the absolute amount of energy consumed. Therefore, we believe that energy efficiency measures must form the starting point for the Government's drive to meet the 2020 target. The scale of the challenge facing the UK means that action is necessary on all fronts.

56.  We welcome, as a first step, the Government package of measures announced on 11 September 2008 to help households become more energy efficient.

57.  However, we are disappointed that the Government are not consulting in depth on energy efficiency as part of their Renewable Energy Strategy work as this suggests that demand reduction will not be a central part of the strategy to meet the target. We believe the UK should commit to an energy reduction target, such as 20% by 2020, by the spring of 2009 with a fully worked-out strategy specifying the steps needed to achieve this.

Renewable heat and micro-generation

RENEWABLE HEAT

58.  The proposed Directive allows for Member States to meet their overall energy targets through renewable heating and cooling as well as renewable electricity. Whereas electricity generation can be sited some distance apart from consumption, and the power moved from one to the other via the grid, the same is not true for heat. The Government's explanatory memorandum on the renewables Directive stated that there are significant barriers to increasing the use of renewable heat, such as a lack of transmission infrastructure. Currently 0.6% of the heating sector is from renewable sources.

59.  Whilst city-wide heat networks and medium sized renewable Combined Heat and Power plants are in existence in several countries (Denmark, for example), renewable heat is often small-scale and generated close to demand. For this reason, discussion of renewable heat is often linked with micro-generation and we follow this convention here.

60.  According to the Government, domestic renewable heat technologies are not currently competitive with conventional technologies like gas central heating. However, this assessment is dependent on the price of fossil fuels.

61.  British Wind Energy Association (BWEA) argued that given the current low level of renewable heat it would not be possible for the heat sector to play a large part in attempting to meet the 15% target. In their view, renewable heat could only provide 3-4% of the UK's final energy consumption (p 93).

62.  On the other hand, the Sussex Energy Group warned that interpreting the "renewable energy target into an equivalent renewable electricity target" risks making the 15% target harder to achieve (p 247). Centrica suggested that given the size of the heat sector (the UK Renewable Energy Strategy consultation estimates it accounts for 41% of final energy demand) there is significant scope for achieving increased renewables deployment through renewable heat (p 116). Furthermore, as the Directive does not concentrate exclusively on renewable electricity, making little use of renewable heat would overburden the electricity sector. Scottish and Southern argued that increasing the UK's use of renewable heat would reduce significantly the amount of renewable electricity required to meet the 15% target (p 241). EDF argued that to meet future, higher CO2 reduction goals decarbonisation of the heat sector would be necessary. It would therefore be short-sighted to ignore renewable heat (p 197).

63.  The UK Renewable Energy Strategy consultation estimates that around 14% of heat (5.74% of final energy consumption) should come from renewable sources by 2020 (p 7). In his evidence to us, Malcolm Wicks recognised the need to make use of the heat sector (Q 300). However, Juliet Davenport of Good Energy argued that although renewable heat could contribute significantly to meeting the target, policy in this area "has not been addressed very well yet, if at all" (Q 99).The UK Renewable Energy Strategy Consultation recognises this and states that to achieve an increase in renewable heat the Government will need to address both financial constraints and a number of other demand-side factors (p 114). The consultation identifies these demand-side constraints as limited awareness of renewable heat by local authorities and the general public; the air quality impact of biomass combustion; supply chain issues; and planning and building regulations.

64.  To meet these challenges the consultation proposes providing a Renewable Heat Obligation similar to the Renewables Obligation for electricity generation (see box 1) or creating a Renewable Heat Incentive scheme similar to a feed-in tariff (see box 2) (pp 114-122).

MICRO-GENERATION

65.  Micro-generation is defined in the Energy Act 2004 as heat generation below 45KW and electricity generation below 50KW. It includes technologies like heat pumps and solar panels. The Government's assessment is that micro-generation will not have a large part to play in renewable electricity generation and will not contribute greatly to meeting the UK's target (Q 10).

66.  It was also put to us that micro-generation should receive attention not only for its potential heat and electricity generating capacity, but also because it can help raise awareness of energy use and energy efficiency. Juliet Davenport of Good Energy was of the view that micro-generation "grasps people's imagination: my house is my castle, I generate my own power" (Q 100).

67.  We received evidence that currently the cost of domestic micro-generation discouraged people from considering it. Both of the witnesses we met in Bristol who have micro-generation facilities in their homes agreed that they had installed them as a matter of principle rather than for economic reasons. Installing solar panels had been so expensive that had they been making a purely economic decision they would not have done so (see appendix 6). We note, however, that these costs are relative to conventional power which depends on the price of oil and gas. If these prices increase significantly, micro-generation may become more attractive.

68.  Although the contribution of micro-generation and renewable heat to the 2020 target may be smaller than that coming from large-scale energy generation, we believe that micro-generation and renewable heat have the potential to contribute significantly to the UK's long-term emission reduction goals.

69.  We recommend the Government treat micro-generation and renewable heat technologies as being as important as large-scale electricity generation. To this end, we believe that the existing micro-generation grants should be increased and a system of grants specifically for renewable heat should be introduced.

70.  The evidence we received demonstrated a much clearer understanding of the issues affecting renewable electricity than renewable heat. However, we welcome the Government's recognition of the importance of renewable heat. The Government's estimate that 14% of heat should come from renewables accounts for around 38% of the UK's 15% final energy target. To achieve this level of renewable heat we urge the Government to commit more fully to renewable heat than our evidence indicates is currently the case.

Potential technology mix

71.  The Government have not specified how the electricity from renewable sources needed to meet the 15% target will be generated, but the common assumption is that the dominant source in the UK will be wind power. The UK Renewable Energy Strategy consultation estimates that the UK would need 14GW of new onshore wind and 14GW of offshore wind installed. The owner of the UK's seabed, the Crown Estate, in June 2008 invited energy companies to register an interest in developing offshore sites capable of supporting up to 25GW of generating capacity.

72.  Other witnesses submitted technology mix illustrations for meeting 40% of electricity from renewables. The estimates varied due to differing assumptions of energy demand by 2020 and the amount of generating potential of each technology. For example, UKERC estimated that by 2020 over 18GW of extra onshore wind and almost 20GW of extra offshore capacity could be needed to provide 40% of electricity as opposed to 32% (p 265).

73.  This reliance on wind is due to the fact that wind turbines are the most commercially mature technology available. Wave energy development is at least 15 years behind wind power and solar electricity remains an expensive technology (UKERC p 266). Whilst there is some scope for small scale hydropower, there is little further scope for exploitation of hydro resources (BERR Q 5).

74.  UKERC's forecast also includes power generated by the proposed Severn Barrage as well as by other tidal power schemes. We were advised that the most productive site proposed for the Severn Barrage could generate around 4.4% of the UK's current electricity demand. However, there are many outstanding issues related to the barrage, including funding, planning and environmental consequences. The feasibility study commissioned by the Government is expected to run until at least 2010 before deciding on the preferred option. Dr Tom Shaw of Shawater stated that it was likely that detailed analysis of the preferred option would take a further four years and construction would take around nine years. He estimated that some electricity generation could come on-stream from year five of construction (Q 48 and Q 50). These estimates would result in the Barrage not being fully completed until 2023 but with partial generation from 2019.

75.  Currently the draft renewables Directive includes provisions to allow large projects that are not operational by 2020, but are under construction by 2016 and are likely to be fully operational by 2022, to count towards the 2020 target. Should the Severn Barrage be built, it may still not be completed in time to contribute to the 2020 target.

76.  We recognise that wind power will be the dominant technology in striving to meet the 2020 target. In order to minimise the risk of the UK becoming reliant on wind power the Government must ensure that other technologies receive, where practical, the policy support needed to bring them to commercial viability as quickly as possible.

77.  It is necessary to await the economic, technological and environmental assessments for the Severn Barrage project before decisions can be made about whether it can be included as a deliverable resource. The Government should not rely on inclusion of the estimated generating capacity of the Barrage to reach the 2020 renewables target. If the UK is to meet its renewable target significant amounts of new generation capacity will need to be built. The length of the timetable for decision-making over the Severn Barrage project cannot be allowed to be repeated for other major generation developments.

Security of supply

78.  One of the issues that the renewables Directive seeks to address is the EU's energy security. In 2005, the EU's import dependency for energy was 52.4%[26]. BERR estimated that this would rise to 65% by 2020 if the EU did not adopt the proposed Directive (Q 11). By increasing the amount of energy generated domestically from renewable sources, the EU should be able to reduce its dependency on fuel imports and improve the security of its energy supply.

79.  The Sussex Energy Group also argued that increasing renewable generation will add to the diversity of power generation technologies and increase energy security (p 249). This view is also stated in the UK Renewable Energy Strategy consultation.

INTERMITTENCY

80.  Professor Dieter Helm argued that security of supply is a more complex matter than simply the issue of reliance on energy imports (p 212).

81.  Due to their nature most renewable technologies are intermittent; they rely on the wind blowing, the sun shining, the tide ebbing and so forth. This intermittency has the potential to affect reliability of electricity supply. The electricity grid operator needs to balance energy generation to meet energy demand second by second. The UK transmission system operator (National Grid) already has to make provision for demand prediction errors and for unexpected faults with power stations and transmission lines. This requires sophisticated processes that allow rapid and cost effective responses to changes in demand or supply. However, since renewable generation depends, in part, on factors beyond human control, a new dimension of uncertainty is added to balancing the grid.

82.  Witnesses were confident that intermittency could be managed, although doing so will increase energy costs (EDF p 197 and BERR Q 13). National Grid has calculated the additional system balancing services they would require to manage 40% of electricity from intermittent sources. They estimate that the cost per unit of electricity supplied would be in the range 0.14p to 0.28 p/kWh, or 1.6-3.2% of the average domestic bill. This would increase the average domestic consumer bill of £390 per year by £6-£12 (p 64).

83.  The Government cited UKERC research that finds that intermittency is a manageable issue, but also noted that additional research is needed on very large penetrations of renewables (p 12). As part of the UK Renewable Energy Strategy consultation the Government commissioned research into renewables penetration from Sinclair Knight Merz (SKM)[27]. The SKM research explores the measures needed to integrate up to 50% of electricity from renewable sources, mostly wind power. SKM find that costs increase with increased renewable generation for a range of reasons associated with intermittency. These include additional system balancing services and the need for conventional reserve plant to ensure reliable operation (p 28, p 34, p 72 and pp 90-91). However, SKM do not report any insuperable problems in managing intermittency with up to 50% of electricity from renewables.

84.  The SKM report notes that it is possible for supply to exceed demand on occasion when large amounts of renewables are installed (p 64). For example, at some times of the year a significant peak output from the Severn Barrage would occur at night, when demand is low and the output from a large capacity of wind could exceed demand on occasion. The Energy Policy Group, Exeter University, cited examples of energy storage technology being used to smooth variations in supply and demand (p 41). Scottish and Southern Energy and the UK Business Council for Sustainable Energy also saw a role for energy storage (p 240 and p 258).

85.  The UK Renewable Energy Strategy consultation document highlights energy storage as useful technology to manage the issues of intermittency, along with demand response, for example through the use of smart meters. It states that the UK currently uses pumped hydro systems (where excess power is used to pump water up to a higher reservoir that can then be released to generate electricity when demand increases). However, the consultation notes that there is limited scope for new pumped hydro capacity in the UK (p 216). Other storage technologies are still emerging (BERR p 13).

86.  One of the consequences of an increased use of intermittent generation is that conventional generation will need to be kept available to ensure demand is met even when renewable sources are unable to generate (EDF p 198, Scottish and Southern p 240). SKM estimate that around 15% of conventional capacity could be replaced by wind power supplying 50% of electricity (p 27). Nevertheless, renewable sources can save fuel and reduce imports. The Commission estimated that, with the need for reserve capacity taken into account, import dependency across the EU could be reduced by 4-5% (Q 426). The UK Renewable Energy Strategy consultation estimates that UK overall gas imports could be reduced by 12-16% by 2020. For the electricity sector, SKM modelling indicates a 38% to 50% reduction in reliance on gas by 2020 (p 7).

87.  We consider intermittency to be a manageable problem but one that will increase costs to consumers. However, the development of storage technologies and other options such as demand-side management could help reduce costs and, by reducing the need for reserve capacity, improve the economic and environmental performance of renewable energy.


21   Impact assessment accompanying the package of implementation measures for the EU's objectives on climate change and renewable energy for 2020, SEC(2008)85 Back

22   From Commission Document COM(2008) 19 final, Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources Back

23   Council document 7224/07 REV1 Back

24   Directive 2006/32/EC on energy end-use efficiency and energy services, OJ L 114 (27 April 2006) pp 64-85 Back

25   UK energy Efficiency Action Plan 2007 Back

26   Source: Eurostat December 2007 Back

27   Growth Scenarios for UK Renewables Generation and Implications for Future Developments and Operation of Electricity Networks, SKM, June 2008 Back


 
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