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ESRC SEMINAR
THE INTRODUCTION OF THE UK RENEWABLES OBLIGATION
University of Bath, 9 May 2008
Iain ToddRenewable Energy Consultant
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Renewables Obligation
• Introduced in 2002• Main policy instrument for
renewables in the UK; treats all technologies equally
• Emerging technologies also to receive supplementary, variable support
• RO support forecast to rise to £1 billion per year by 2010
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NFFO scheme
• Renewable energy companies bid for competitively-let, long-term contracts, to supply electricity at premium rates
• Mixed success• Costs of renewables fell during
1990s• But projects delayed due to
planning, technical and commercial reasons; certainly no market transformation
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Objectives of RO (1)
• To transform the market, to transfer renewables into the mainstream from a peripheral position
• To compel energy suppliers to develop major renewable energy projects
• To provide long-term commitment in legislation (2027)
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Objectives of RO (2)
• To use the power of the market to control costs
• To harness competition between energy suppliers
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Objectives of RO (3)
• To assist energy security• To create economic
opportunities for domestic companies
• To promote innovation, to reduce unit costs
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Technologies
• Several consultations• Exclusion of large hydro• Exclusion of incineration of
mixed waste• Inclusion of live NFFO sites• Buy-out price increased from
£20 per Mwh to £30
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Early life issues (1)(2002-2004)
• Communication• Confidence, esp financial sector• Calls for more help from some
technologies• Calls for greater duration –
extension from 2010 to 2015• Extension of co-firing policy from
2011 to 2016
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Early life issues (2)(2002-2004)
• TXU bankruptcy (£20m in first year)
• Differences between England/Wales and Scotland
• Introduction of Northern Ireland
• Headroom• Exit strategies
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Effectiveness (1)
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Effectiveness (2)
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NAO report (2005)
• “It is unlikely that a policy tool focussed directly on reducing emissions across all sectors of the economy – such as a carbon dioxide tax – would have yielded the same level of renewable generation in this time.”
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NAO report (2005)
• “The level of support provided by the RO is greater than necessary to ensure that most new onshore wind farms and large landfill gas projects are developed.”
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NAO report (2005)
• “No criterion for reducing or withdrawing support from a particular technology.”
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NAO report (2005)
• NAO consultants predict hitting 2010 target
• Report recommends consideration of banding
• Report recognises planning and grid as the key factors affecting the success of the policy
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NAO report (2005)
• “Co-firing will not discourage the development of other non-biological sources of renewable generation”
• There is a confusing proliferation of support schemes – Carbon Trust, DTI Technology Programme, RDAs, now ETI …
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RO v Feed-in
• Reward for generation of renewable electricity, per Mwh
• Could vary between technologies
• Could either be fixed sum, or vary with the market – ideal might be elements of both?
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RO v Feed-in
• Pace of development in UK not set by RO v Feed-in
• Pace of development set by planning regime
• And in future possibly constrained by grid
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RO v Feed-in
• Speculatively, non-variable rewards might favour more community-based schemes, which might move more quickly through the planning system
• But very speculative
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Trading of certificates between countries
• Not the same as harmonisation of support schemes
• Investment would be drawn to the area of greatest economic efficiency
• Missed opportunity to reduce costs
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Future development of RO
• Banding• Trading; eventual link to ETS?• Devolution (marine, island, EFW)• Fixed rewards for micro-
renewables ? If so, boundary?