United Kingdom

United Kingdom

National energy policy gives wind star role -- British government makes major commitment to climate gas reductions and sets nuclear aside for renewables

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The wind industry is poised to lead the way in meeting the goals of the UK's new energy policy, which calls for a significant increase in renewable energy and energy efficiency to achieve a 60% reduction in carbon dioxide emissions from 1990 levels by 2050. "We've got the resources and the skills," says Nick Goodall of the British Wind Energy Association (BWEA).

"Companies have the appetite to build and it appears that government has embraced the vision. All we need now is to see government follow through and knock down the remaining barriers, largely institutional, to the widest possible development of renewables, not just wind. Concerted effort to crack these problems will see the government's mild caution overcome."

As well as the 60% by 2050 target for cutting carbon dioxide emissions (the largest target of any country), the UK has strengthened its aim for 10% of the UK's electricity to come from renewables by 2010 into a formal target. In addition, a new carbon trading system, to start in 2005 in line with EU plans, will be the "central plank" of future emissions reductions policy. The planning system is also being revised to streamline the building permit process, which has proved to be a major barrier to onshore wind development.

The long awaited government White Paper on energy, published on February 24, reveals the "mild caution" highlighted by Goodall in its failure to set a firm target beyond 2010. The government refers to its goal of 20% renewables power by 2020 as no more than an "ambition." Moreover, it is not fully closing the door on nuclear energy, which might be needed, it says, if environmental goals are not met. No new nuclear build is expected in the foreseeable future.

In his most significant speech on the environment, timed to coincide with release of the White Paper, Prime Minister Tony Blair was staunch in his commitment, calling on all countries to adopt the 60% target. "We have to do what is right for the long term. The truth is, investment now to meet the challenges of these issues is worth every penny in the long term. Kyoto is not radical enough. If we harness new technology the evidence is mounting that we can achieve a target of 60% and at reasonable cost." He adds: "Are these solutions expensive? Not against the scale of the problem."

Tough targets

Renewables currently account for around 3% of the UK's total energy supply, most of it from wind. Total wind capacity now stands at 555.8 MW from 1003 turbines, but according to the Institute for Public Policy Research (IPPR), a think tank, wind could account for as much as 15% of the UK's fuel mix by 2020. To achieve the initial 10% by the 2010 target, 10,000 MW of renewables is needed by 2010 -- an annual build rate of over 1250 MW and greater than the total 1200 MW of renewables (excluding large hydro) currently operating.

Wind power will contribute most to the target, with BWEA predicting it could account for up to 8% by 2010 -- enough to cover the predicted 7% of power supplies to be lost by the closure of British Nuclear Fuel's several magnox plant by that date. Over 300 MW of wind is planned for construction in 2003 and a further 600 MW in 2004, bringing the UK wind industry closer to its goal of over 3200 MW by the end of 2006, a six-fold increase on current capacity.

"This is the first time any British government has put the environment at the heart of its energy policy," says trade and industry secretary Patricia Hewitt. "I am reasonably confident that we can achieve the step change required to meet the 2050 carbon dioxide reduction target without the need for new nuclear capacity." It would, however, "be unwise to completely rule out any new nuclear build in the next half century."

Policy commitment

The government says it remains "firmly committed to the current Renewables Obligation and will maintain the level of support it provides as planned until 2027." According to BWEA, the obligation could lead to a 20-fold increase in wind by 2010. Its progress will be reviewed in 2005/06 when government "will elaborate a strategy for the decade to 2020," says the White Paper. "This will take account of the experience of carbon prices arising from the emissions trading scheme and of the costs of renewable technologies."

An additional £60 million in capital grants was announced for renewable energy, bringing government spending on green power projects up to £348 million over the four years up to 2005/06. "This funding will enable us to increase momentum and to take forward a broad strategy for renewables including ramping-up medium term funding for offshore wind," says the White Paper. Goodall says the extra money should cover the shortfall in previous funding that has prevented or delayed some planned offshore wind projects.

Lease agreements have been signed for 1400 MW of offshore capacity, but the industry estimates that a further 3000-4000 MW can be built by 2010. Government is keen for that to be achieved and plans to "bring forward legislation as soon as possible to enable the granting of licences for offshore wind farm developments beyond territorial waters."

Ministerial caution

Energy minister Brian Wilson reflects the cautious camp in government. "We are placing an enormous amount of faith in offshore wind but we are not there yet," he says. "There is no point hiding how challenging meeting the 2010 target is. But the opportunities are there. The incentives are there. Now let's see the industry get on with it." He stresses the need for improved electricity transmission and infrastructure if industry is to succeed.

According to Hewitt, the policy will inevitably mean a hike in electricity prices of 5-15% by 2020 for domestic consumers. Prices for industrial customers could rise as much as 25%. These estimates are already being questioned by the wind industry, which believes extra costs could be as low as 3%.

Electricity and gas markets regulator Ofgem immediately responded to the White Paper by saying that least cost to consumers is its primary concern. The White Paper, however, calls for the regulator to adopt a new environmental imperative. But Ofgem boss Callum McCarthy only concedes that development of electricity networks for transport of green power is "one of the biggest challenges" facing the authority and that Ofgem will work to encourage efficient investment in such networks.

The critics

Although the White Paper has been welcomed by the power industry (including a cautious welcome by British Nuclear Fuels) and environmental groups, some have criticised government for the lack of a firm 20% by 2020 target. "This will send an extremely negative message to financial institutions considering whether to invest in renewable energy projects," says the IPPR's Alex Evans, echoing concerns expressed by organisations such as Greenpeace, Friends of the Earth and Green Alliance, among others. Russell Marsh of the UK Business Council for Sustainable Energy agrees. "Business doesn't want targets for targets sake but it needs the confidence to invest in sustainable energy technologies for the long term -- the White Paper does not deliver that confidence," he says. "The government is at risk of undermining existing investment and missing its longer term goals unless it sets a clear path to the future."

Wilson claims he is less interested in setting targets than in creating the conditions to ensure that renewables take an increasing share of the market. "There is a real danger of target setting becoming a substitution therapy for actually doing things," he says. "My far higher priority is to make sure that the necessary steps are taken about planning, about infrastructure, about developing technologies, about ensuring the investment is there -- all of these things are far more important than getting bogged down in specific targets."

Goodall tends to agree. While acknowledging a formal 2020 target would have been "nice," he argues that the policy and the commitment from government demonstrated in the White Paper opens the door to significant new development. "This paper is not bad news. The government has been reasonably precautionary but this was the mouse that roared," he says. "This is about persuading the institutions of government and industry to make a radical change in their way of thinking. Was there anything regressive for renewables? No. Was there anything regressive for wind? No. The question now should be simply how do we build on this momentum?"

Guaranteed market

Obstacles to significant growth in renewable energy development such as planning delays and fair access to the grid remain, but "all these issues are being addressed," he continues. "If government does not follow through then yes we will have a problem, but the signs are encouraging that they will."

With the Renewables Obligation in place and government vowing the legislation will remain at least until 2027, Goodall is confident about what the wind industry can achieve. "You would have to be spectacularly incompetent not to make a significant return on a wind project," he says. "For the next few years at least it is a guaranteed sellers market." While some investors and renewable industry players are already beginning to doubt the longevity of the Renewables Obligation, Goodall is not. He believes that at the review point the obligation is likely to be doubled and any problems with it ironed out as long as the industry plays its role in working with government. "I am as confident as anyone can be in so far as it's the thing that's working," he says.

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