Exciting Opportunities Arising from UK Government Low Carbon Strategy

The following is an extract from the Enviros Consulting September 2009 Briefing Note on the UK's Low Carbon Strategy:

The UK government has announced a number of financial drivers and measures to remove barriers to deployment of more renewables, as part of their low carbon strategy.

This rapidly growing industry will bring opportunities for many of our customers. Nonfinancial measures include a new planning PPS, measures to improve grid access and a new Office for Renewable Energy Deployment.

However the main drivers announced are the financial ones outlined below.

The Renewables Heat Incentive

- The Renewables Heat Incentive will deliver a staggering 72TWh/yr of heat by 2020 from biomass, solar, heat pumps and biomethane
- The policy to be in place from April 2011
- It will give guaranteed payments to those generating heat from renewables – domestic through to industrial scales
- We should expect a fixed rate paid on energy yield and cost of plant – not on CO2 emissions saved

UK Government will consult at the end of this year on scheme details and on fundamentals including levels of funding and how the levy to fund it will work

Installations from 15 July 2009 onwards will qualify for payments though there will be environmental standards and a qualification scheme for installers.

Measures to support electricity from renewables

The plans for financial support for renewable electricity has been presented in a separate consultation paper

Renewable Electricity Financial Incentives.

There are some detailed changes to the Renewables Obligation (ROC) regime that will impact larger generators and are designed to bolster confidence in this support mechanism.

However, perhaps the most significant announcement is of a new mechanism known as Feed in Tariffs (FIT).

As presented in the consultation paper FITs:

• Will give significant payments to small scale renewables – up to 5MW but with much higher payments for micro-renewables
• Will come into operation from April 2010 with consultation closing Oct 09 (though schemes built from 15 July 2009 will qualify)
• Will support delivery of up to 2% of our electricity by 2020
• Will pay the tariff for every unit of generation (whether used on site or not) aiming to give investors 5-8% internal rate of return (IRR)
• A FIT contract would be for 20 years, index linked and transferable from person to person
• Fix the price that will be paid for power exported at reasonable level (5p/kWh suggested)
• Will be paid by those supplying the site with electricity to the site of generation.

Payments proposed are much higher than anything seen in the UK so far.

For example a householder installing a retrofit domestic scale solar panel would get 36.5p/kWh for all the generation from the panel, would enjoy free electricity from it while using it and would get a suggested 5p/kWh for electricity exported (income tax free).

Other Opportunities

The Low Carbon Transport Strategy and the Low Carbon Industrial Strategy will give other opportunities to those sectors of the industry.

The transport strategy proposes that the proportion of biofuels being blended with petrol and diesel be increased to 10% by 2020 in line with the EU directive.

This is a huge increase in the amount of liquid biofuels required and could offer opportunities for farmers.

However, it is recognised that there are potentially negative food security and environmental issues associated with this policy and we can expect increasingly stringent controls on sourcing of liquid biofuels.

The transport strategy also outlines measures to reduce transport emissions by:

• Improving the efficiency of new vehicles (cars, vans and buses)
• Electrifying more of the rail network
• Facilitating the use of electric vehicles – including the offer of financial support to purchase them
• Encouraging more walking, cycling and low carbon travel habits • Working on international agreements on shipping and aviation.

The Low Carbon Industrial Strategy recognises the opportunities for UK industry and commerce. To maximise the opportunities, the government intends to remove barriers to making the changes and has announced £405 million of support:

• £120 million will be used to develop offshore wind
• £60 million to develop wave and tidal power
• £6 million to contract “60 or more” low carbon affordable homes
• £10 million increase, from £20 million to £30 million, for electric vehicle charging infrastructure and £25 million Low Carbon Vehicle Demonstrator Programme • £4 million expansion of the Manufacturing Advisory Service
• £12 million for green chemicals/sustainable biotechnology
• £15 million nuclear advanced manufacturing research centre
• £150 million for UK Innovation Investment Fund -> £1billion in 10 years.

How Enviros can help

This is an exciting time for initiatives in the low carbon sector and with these recent papers, the Government’s direction and support is now clear.

With the ‘step change’ represented by these papers some projects that were not previously viable now may well be. Enviros have over 30 years of experience in this field so have the skills, knowledge and expertise needed to be able to support you as you work to make the ‘low carbon transition’ needed or capitalise on the opportunities presented, whether you are working in the public or the private sector.

Get your FREE copy of the full Low Carbon Strategy briefing document here.

UK Energy Bill - Feed-in Tariffs Welcomed by Biogas Industry

Legislation News from the New Energy Focus Web Site; Industry welcomes feed-in tariffs for power and heat

Biomethane transport fuels company CNG Services has said the renewable heat incentive would allow "green gas" to be used to fuel commercial vehicles.

The renewable energy industry has welcomed government plans to bring in feed-in tariffs for green power and heat - but has called for a clear timetable for their introduction.

Separate tariff schemes are being developed to promote small scale electricity generation and to incentivise the use of renewable fuels in producing heat (see this New Energy Focus story).

The renewable energy sector's trade association, the Renewable Energy Association, said today that the proposals being included within the Energy Bill are "vague" and that no timetable is given within the legislation.

The REA, which has been lobbying for some time to get a feed-in tariff to promote both small scale renewable electricity and heat, said there was enthusiasm among its members for the government's decision to adopt the measures.

Philip Wolfe, director general of the REA, said: "The REA has repeatedly called for the introduction of a tariff and we are delighted that government has recognised that this incentive will encourage new groups of players into the market. We also welcome the recognition of the urgent need to support renewable heat and biogas. Heat represents the biggest energy use in the UK, and had previously been ignored by policy-makers.

"However the amendments it has tabled are very vague and the lack of any firm timetable shows that there's still a long way to go," Mr Wolfe added.

3MW Cap

The wind industry's trade association, the British Wind Energy Association, also welcomed the feed-in tariff amendment, but expressed concern regarding the 3MW cap included within the legislation.

This cap means that projects above a 3MW size would receive support through the Renewables Obligation, with smaller projects rewarded with the feed-in tariff. However, the government could set a lower cap through secondary legislation as it finalises the details of the feed-in tariffs.

Jennifer Webber, public affairs manager at BWEA, told New Energy Focus today: "We are delighted to see that the Secretary of State has tabled this amendment as we have been calling for it for some time. However we do feel that the threshold of 3MW is too high, and we are concerned that it could interfere with the function of the Renewables Obligation. We would like to see the threshold lowered to 250-300kW."

The biogas sector has welcomed the proposed renewable heat incentive, suggesting the move was "potentially significant".

Biogas companies believe the incentive will offer an alternative to the current Renewables Obligation, which pushes plants like anaerobic digesters to generate electricity by burning biomethane - wasting the heat produced in the power generation.

BERR Listens To Renewables Obligation Waste Concerns

BERR has published the Government’s response to the consultation on the reform of the Renewables Obligation, which took place during summer 2007. In its response the Government has recognised many of the concerns raised by ESA during the consultation period.

The regulations for the measurement and sampling of biomass have been proven to be ill suited to the heterogeneity of mixed waste fuels. Consequently waste-fired power plants have been unable to satisfy Ofgem with sufficient certainty as to the biomass content of their inputs and therefore been unable to claim ROCs for their renewable generation. BERR had already conceded the principle of deeming the biomass content of waste but had previously suggested that this should be set at the conservative level of 35%. In response to ESA lobbying, the Government has now decided initially to raise the proposed deemed level to 50%, in line with the level recognised under the climate change levy.

BERR has also noted the difficulties that changes to the qualifying index for good quality combined heat and power (CHP) made to the ROC eligibility of waste-fired CHP facilities. The Government has consequently decided to change the qualifying criterion for such plants, which will now be based on a single efficiency threshold of 35% gross calorific value.

Other changes made by the Government include a commitment to the principle of grandfathering support levels for renewable electricity projects. More at ESA UK.