Memorandum by the British Wind Energy
Association
1. The British Wind Energy Association (BWEA)
is the leading UK trade association in the field of renewable
energy, with over 350 corporate members representing the large
majority of the wind energy business in this country. Wind energy
is the fastest-growing renewable technology in the UK, and will
make an increasingly significant contribution to our electricity
supplies over the next decade and beyond. BWEA also represents
the interests of the emerging wave and tidal stream energy sector,
building on its experience in the development of offshore wind.
We therefore welcome the opportunity to submit evidence to the
Sub-Committee on the subject of the EU's Renewable Energy Target.
GENERAL QUESTIONS
How achievable are both the EU's general 20% and
the UK's national 15% renewable energies target?
2. The contribution of renewables to the
EU energy sector was 8.5% of overall end use in 2005. Much of
this energy was produced by large hydroelectric generators, though
there was also a significant contribution from biomass in a number
of forms. While there should be some leeway for growth in use
of biomass, large hydro is likely to have reached a plateau: apart
from a few exceptions at the margin, potential sites are off-limits,
primarily for environmental reasons. The growth required for the
20% target to be met in 2020 will have to come from other sources.
3. Fortunately, there are a number of technologies
that are growing rapidly and will be making very significant contributions
in 2020. Sources such as solar, in both thermal and electric forms,
geothermal energy, accessed through heat pumps, and biomass and
waste technologies are outwith the expertise of BWEA; their proponents
will lay out their views on delivery, while we will reserve our
comments to the technologies of wind, both on- and offshore, wave
and tidal stream. These latter forms will be vital to the UK meeting
its share of the target.
4. According to figures from the European
Wind Energy Association,[1]
across the EU, there were 56GW of wind power installed at the
end of 2007, 1GW of which was offshore. This capacity generated
119TWh (10mtoe), 3.7% of the Union's electricity demand. Wind
was thus generating about one-quarter of the EU's renewable electricity
last year. The European Commission has calculated that 34% of
the EU's power will have to be renewably-sourced if the 20% target
is to be met, given the expected contributions of renewables for
heat and transport, so capacity able to provide a further 20%
of power demand must be developed in the next 12 years.
5. EWEA's projection for 2020 is that 180GW
of wind power will be installed in 2020, 35GW of which will be
offshore. This capacity will generate 477TWh (41mtoe), equivalent
to between 11.6% and 14.3% of EU power, depending on the level
of overall demand expected in 2020. Wind will thus be providing
about half of the increase in renewable power required. It is
reasonable to expect other renewable sources to collectively provide
the rest, though BWEA will leave it to others to comment in detail
on the feasibility of those contributions.
6. In the UK, 41% of our energy is used
for heat, 37% for transport and 22% in the form of electricity.
We are starting from a very low base of renewable energy use:
the current UK share of 2% is mostly in the form of electricity
generation, where 5% of our supplies are renewable, while renewable
heating and transport fuels only make very small contributions
to their sectors. Not only are contributions from biofuels and
renewable heating small, the policy agenda to drive their implementation
is much less advanced than for power, and so their growth will
be slower than is possible in the electricity generation sector.
From bases of well under 1% in both cases, the most that can be
expected from each is 3-4% of UK energy supplies. Renewable electricity
will therefore have to be contributing half of the target, perhaps
7.5%; given that power is only 20% of overall energy, renewable
power will have to make up at least 35% of UK electricity supplies
in 2020 if we are to meet our target, possibly more.
7. Of the available renewable power technologies,
wind is the only source that can deliver in the bulk quantities
that will ensure the target is met, given the development of the
technology and the resource that the UK has—the best in
the EU. Other technologies, particularly the marine sources of
wave and tidal stream, can make a contribution by 2020, though
major growth is likely to be after this date. Were Government
to decide that it is desirable to build the Severn Barrage, this
could be under construction by 2020, but it is unlikely to be
generating.
8. Wind is a mature technology onshore and
the challenges are primarily about planning and grid availability,
though attention will have to be paid to the funding mechanism
in order to ensure continuing development through to 2020. Current
costs are well-defined for onshore wind, though uncertainty remains
as to which drivers of cost will be most prevalent in the future,
and thus how the overall cost will develop.
9. Offshore wind presents different challenges
as the technology will need further development to allow its full
contribution to the 2020 target to be realised. This is required
to move into the deeper water sites, further offshore, that will
be required to reach the maximum contribution. Since the necessary
innovations in turbine and foundation technology have not yet
been brought forward commercially, the costs to build these developments
are unclear. The regulatory regime for the offshore grid is untested
as yet, and the reinforcement of the onshore grid necessary to
accept the power produced is yet to be planned, let alone procured
and built. Efforts are also required to build the industrial capacity
in the UK to deliver the volume of equipment required.
10. Wave and tidal stream technology is
less well developed than even offshore wind, and so presents the
most difficulty in forecasting deployment and costs. The UK has
a significant opportunity to develop a world-leading industry
here, however. The consenting issues for the marine renewables
are not dissimilar to offshore wind, and so there are key synergies
here that can be exploited.
11. In BWEA's view, if the challenges to
developing these resources are met, then capacities of 13,000MW,
20,000MW and 1,500MW of onshore wind, offshore wind and marine
respectively are entirely possible by 2020. These would contribute
approximately 10%, 17% and 1% of UK power in each case. Therefore,
nearly 30% out of the over 35% needed to meet the target can be
obtained from wind, wave and tidal stream; existing hydro will
still be generating then, providing 2-3% of our power, so there
will only need to be small contributions from other sources. If
the Severn Barrage goes ahead and is counted towards the target,
it could be providing a further 5% of the UK's power. Further
contributions from wind, wave and tidal stream could be brought
forward: for instance, the UK Government has started a process
that will see sites for offshore wind awarded that would enable
up to 33GW of this source alone to be delivered, though to greatly
exceed 20GW will need very strong Government drive, implemented
immediately.
How coherent are these proposals in the context
of the EU's energy policies in general and the Third Energy Package
in particular?
12. BWEA believes the renewables proposals
are consistent with EU energy policies in general. Most importantly,
the increase in contribution from renewables will be vital in
meeting the EU's objectives on reducing carbon emissions. The
477TWh of wind power forecast by EWEA for 2020 should mean 328mt
of CO2 emissions are avoided, 44% of the amount required to meet
the Union's target of reducing emissions by 20%. Development of
renewable energy will also reduce the import dependence of the
Union, which is a key objective (see below). Wind power in particular
has been instrumental in increasing competition in the European
power sector, with new players gaining a foothold through development
of wind projects. Renewables can also improve the EU's competitive
position in line with Lisbon objectives: wind power in particular
is an area where Europe shows technological leadership.
13. In BWEA's and EWEA's view, the Third
Energy Package, and in particular the proposals on ownership unbundling
of grids, is entirely complementary to the proposals on renewables:
without movement towards the level playing field the Third Package
aims to provide, the renewable objectives will be more difficult
to reach, while the public policy objectives of requiring more
renewable energy on networks can be incentivised without distorting
this playing field.
14. To what extent are these targets capable
of improving the EU's security of energy supplies? The extent
to which the EU's security of supply is improved by meeting renewable
targets will depend on which sources of energy are displaced.
With the emphasis on electricity as described above, the fuels
displaced will be mostly coal and gas: the more gas displaced,
the more imports are avoided, since a greater proportion of coal
is produced within the EU; the more coal displaced, the higher
the carbon reduction benefit. In any case, the use of renewables
should primarily displace imports, given that these will often
be from higher-cost and/or riskier sources. If the increase in
renewables from 8.5% to 20% results in 10% of our energy not being
imported, that will mean a significant reduction in the EU's energy
dependence, which is currently running at 50% and would be 65%
in 2030 on current trends.
GRID ACCESS
How effective has the existing legislation (2001/77/EC)
been in encouraging grid access for renewable energy generators?
15. The existing directive has had mixed
results in promoting access to the grid for renewable generators
across Europe. While such generators are guaranteed transmission
and distribution of their power under the legislation, the weaker
provisions on access ("[Member States] may also provide for
priority access to the grid system of electricity produced from
renewable energy sources"—emphasis added) has allowed
EU countries to continue inconsistent systems, leading to patchy
promotion of renewable access. In some countries this weakness
in the directive has allowed vertically integrated power companies
to be obstructive to new renewable generators, where these have
been perceived to be a threat to the generation side of their
businesses. In general, however, the issue of access is tied up
much more with the building of new grid capacity, and the delay
that this causes, rather than procedures surrounding grid entry.
16. In the absence of a liberalised market
across the EU, the UK government must not undermine efforts to
promote renewable energies through regulatory incentives relating
to grid access (as proposed by the European Commission in Article
14 of the draft directive). Priority access to transmission and
distribution grids for electricity from renewable energy sources
(as proposed in Article 14) should be interpreted and implemented
along the same principles and criteria in the different member
states, in consultation with the stakeholders, so as to correct
and avoid market distortions. This should be reflected in the
relevant harmonised technical and market codes, to be drafted
according to the procedure that will be set once the Third Energy
Package is agreed.
To what extent does grid access remain a significant
barrier to increased consumption of renewable energies? Is it
consistently a problem across all Member States?
17. On the whole, the issue of access to
grids is a lesser problem than the building of new grid capacity
to accept renewable generators. What might be tied up with "access"
as more of a problem is balancing and stability of networks: directive
2001/77/EC dictates that transmission and distribution for renewables
are guaranteed "[w]ithout prejudice to the maintenance of
the reliability and safety of the grid". As networks rely
on higher proportions of variable renewables like wind power,
the effort required to ensure grid stability will increase as
a result, and this may be a barrier to full development. As numerous
studies have shown, however, this is a manageable issue.[2]
How does Use of System charging affect grid access
for renewable energy generators? How far can the different levels
of renewable energies take-up in different Member States be attributed
to Use of System charging and cost sharing rules?
18. Member States have different approaches
to charging for use of networks. These range from "shallow"
regimes, where generators pay for the connection to the network
and other costs are spread across all grid users, through to the
situation in the UK where new generators are expected to pay for
the full cost of connecting them to the system, as well as locational
charges to reflect transmission losses. Clearly the more that
charges are loaded towards the renewable generator, the more revenue
from power sales will have to be directed to grid costs, and the
less the profit for the developer. In general, this is not a problem
as long as the support system provides income such that the difference
between revenues and costs is large enough, and this is generally
the case in the UK: the difficulties in delivery of wind power
have not been directly economic in nature. In the north of Scotland,
however, the charging regime results in high transmission costs,
which are a disincentive; future offshore projects will also be
paying high costs for their network service. BWEA supports the
principle of cost reflectivity, with generators paying in full
for the services they require, but if the income received is not
sufficient for them to develop profitably when they are paying
these costs, then this situation needs to be examined critically.
What impact do the various systems of reinforcement
planning and work have on encouraging renewable generation? How
important is the issue of constraint in increasing Member States'
renewable generation?
19. The issue of expanding grid capacity
to accept large quantities of new renewable energy is crucial
to the EU and UK meeting their targets. New networks have long
planning, procurement and build times, usually well in excess
of the project cycle for developers; consequently, grid owners
and operators need to think strategically about the reinforcements
required to accept these new plant, coping with the uncertainty
caused by having to plan for projects that have not yet been brought
forward by developers.
20. In other European countries, grid companies
have been through a process of dealing with the new technology
of wind, initially with suspicion and then with acceptance as
they have grown familiar its characteristics. In Spain and Ireland
particularly, hostile operators (RED and ESB respectively) have
moved to be enthusiastic partners in planning new grids; wind
developers have accepted the timetables for connection as they
have participated in their development. While there are delays
in providing the infrastructure, which will be a constraint on
delivery of renewables, the issues are being resolved.
21. In the UK, however, this has not been
replicated, though National Grid is keen to work with new generators
to see them connected in a timely manner. The problem here is
that Ofgem, as a regulator clearly focused on the cost to the
consumer, will not allow new capacity to be planned without connection
applications from generators, for fear of stranded assets. Developers
are thus placed in a dilemma: either apply early for a connection,
before planning consent is gained, with the risk that fees paid
for the application are lost if the project fails, or apply after
consent is gained, which risks delaying connection by several
years. Solutions to this impasse are being discussed, but in general
there needs to be more flexibility shown so that National Grid
can move ahead with the planning for work on the network which
is clearly required if renewable targets are to be reached. This
may be facilitated by the National Policy Statement for energy
networks that will be produced under the new national planning
system currently being legislated on. We do not advocate procurement
and installation of infrastructure ahead of firm connection applications,
but much desk-based planning and consent work can be done beforehand.
To what extent is further co-ordination of National
Regulatory Authorities needed?
22. Coordination amongst regulators is required
to facilitate further interconnection between Member States: the
more systems are interconnected, the more variable renewable generation
can be accepted, since the new grid capacity allows exchange of
power when the weather provides surpluses in different countries.
This is recognised in the European Commission's Trans-European
Networks—Electricity (TEN-E) programme and the appointment
of a number of "grid coordinators" to promote particular
strategic connections, including for offshore wind. Regulators
need to work further to ensure that market conditions at either
end of the new wires allow free trade of power through them, but
this is in hand through the European Regulators' Group for Electricity
and Gas (ERGEG).
How far do current regulations inhibit access
to the grid?
23. Regulatory standards can inhibit grid
access, and are a key inhibiting factor to getting renewable generation
onto the UK grid. In the UK, the Security and Quality of Supply
Standards (SQSS) govern when generators may connect from a technical
point of view. These essentially require that grid capacity must
be provided to take all of the output of a new generator before
it can be allowed to connect. These standards were written based
on the requirements of large, dispatchable plant, and do not reflect
the needs of variable renewable generators like wind power. The
generation pattern of wind, dictated by the weather, means that
wind farms do not often need the full capacity of the grid; rather
than have developers delay connection until grid companies have
provided 100% ability to export the power, BWEA believes that
a system whereby generators are allowed to connect within a set
time frame, on the understanding that there may be curtailment
at certain times due to lack of grid capacity, would be better.
We refer to this concept as "connect and manage". The
Transmission Access Review that BERR and Ofgem are currently leading
is considering this option, and we strongly hope that it is taken
up swiftly.
SUPPORT SCHEMES
At what level should the EU be involved in harmonising
or regulating support schemes offered by Member States to encourage
renewable energy generation?
24. Support schemes for renewable energy
are, and should remain, the responsibility of Member States, under
the principle of subsidiarity. Renewable resources vary between
countries, and so it is only right that States decide what is
the best way to develop them. The draft renewables directive opens
the door to "flexibility" through the trade in renewable
Guarantees of Origin (GoOs), and since the targets for each country
are partly based on GDP per capita and not renewable potential,
this is appropriate. Extreme care needs to be taken, however,
so that such trade does not disrupt the national schemes, since
the latter will be the primary means of delivering the large increase
in renewable energy required.
25. The Commission will regulate support
schemes through its powers to scrutinise Member States' National
Action Plans: if the NAP is judged to be inadequate, including
in the area of support schemes, it can be referred back to the
Member State. However, the Commission should refrain from attempting
to impose a harmonised support scheme across the EU; any such
system will inevitably be different in some way from every national
scheme in the 27 Member States, and thus introducing a harmonised
arrangement will result in uncertainty and disruption, which we
cannot afford if the targets are to be met. In any case, it is
not sensible to talk about harmonising the system for renewables
when the market for electricity generally is not yet harmonised.
Until such time as there is a level playing field for trade in
power across borders in the EU, then all talk of harmonising support
for renewables should be quashed.
26. However, BWEA believes that there is
leeway for some States to open up borders to free trade in GoOs
in so-called "cluster" markets. In this regard, the
initiative of Sweden and Norway to set up a common green certificate
trade will be an important test. The renewables directive should
be drafted in such a way that it allows, but does not mandate,
such trading.
What impact have the various schemes in operation
across the Member States had on encouraging renewable energy?
How have these schemes affected take-up both by producers and
commercial and domestic consumers?
27. The various support schemes across the
Union have been vital in encouraging the new renewable technologies.
Policies in the power sector have been most successful, though
initiatives on heat and transport are also showing some results.
28. The lesson of the UK is that a suitable
support scheme will not be successful if the non-economic barriers
are not addressed: since the introduction of the Renewables Obligation
in 2002, about 15,000MW of onshore wind capacity has been submitted
to the planning system in this country—and half is still
there; of the successful projects, some are awaiting grid connections.
If these two issues had been dealt with effectively earlier, then
the RO would be regarded as a very successful system. One of the
main benefits of the RO has been the engagement of the mainstream
power companies in the renewables sector: arguably, this has led
to companies like Eon and RWE changing their opinions of these
technologies and thus bringing them into their core international
strategies.
29. The take-up of distributed renewable
generation technologies in the UK under the RO has not matched
some other countries, where different support schemes have been
in place, notably feed-in tariffs. While BWEA is strongly of the
opinion that the RO should be retained for larger generators,
in order to retain investor confidence in the UK market, we also
believe that a feed-in tariff for smaller generators may be justified.
This is due to the failure of the grant-based Low-Carbon Buildings
Programme to deliver a thriving microgeneration sector, and the
mismatch between a complex system like the RO and the need for
a simple mechanism to encourage a multitude of potential small
generators to invest.
Will cross-border renewables markets be genuinely
affected by the existence of a variety of support schemes? Is
necessary investment hampered by lack of market harmonisation?
30. As noted above, the prime vehicle for
delivering the required renewable energy will be national support
schemes; this is particularly true because of the stipulation
in the current draft of the directive that countries must meet
their interim targets for delivery of renewables before they can
export GoOs to other Member States, a position that BWEA fully
supports. In the de minimis view of trading, this will
be purely an intergovernmental function, with countries that have
generated a surplus through a successful national support scheme
able to recoup some of the cost through exporting GoOs to countries
that have a less successful scheme, less resource, or both. Whether
there needs to be cross-border trade by companies is debatable.
Given the free movement of capital within the EU, companies can
invest wherever they like and receive the return that the relevant
support scheme provides. The advantage of cross-border trade would
be to allow companies to invest in countries outside of the national
support scheme, and this should be encouraged in order to ensure
that the 20% target is met at minimum cost. However, as noted
above, any move to go beyond intergovernmental trading will need
to be done with care to ensure that the national schemes, which
are the most important factor, are not disrupted.
To what extent would the enhanced use of Guarantees
of Origin certificates require the harmonisation of support schemes?
31. It is entirely possible for GoO trade
to be undertaken with no harmonisation of support mechanisms,
since such trade could operate completely outside of these mechanisms.
If Member States move towards the "cluster market" approach
referred to above, then there will need to be a quite high degree
of harmonisation if there is not to be gaming between the countries'
support mechanisms. It is important to note that this harmonisation
will have to extend to non-renewable conditions such grid costs:
if there is disparity across two countries, with generators having
connection costs paid in one but not in the other, then consumers
in the former country may be effectively subsidising the latter
country in meeting its target if GoOs are cheaper there and thence
are exported in volume to the country where generators have to
pay in full for their grid service.
23 April 2008
1 Pure Power: Wind Energy Scenarios up to 2030, EWEA,
March 2008 Back
2
See, for instance, The Costs and Impacts of Intermittency,
UK Energy Research Centre, March 2006. www.ukerc.ac.uk/Downloads/PDF/06/0604Intermittency/0604IntermittencyReport.pdf Back
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