Public Sector Energy Editorial 29 September 2015
An analysis of the local authority energy market and the latest developments around the UK.
Policy & Strategy
There are rumours swirling around that DECC is in crisis. The Department is unlikely to survive in its current form and it has been rumoured for some time that it will be merged with either BIS or DCLG or both, into a super department to cut costs. However, with the ship literally sinking under the new Tory Government, there are departures and a collapse of morale amongst those civil servants that have worked on the green agenda over the past five years. This is understandable: under George Osborne’s stewardship it can hardly be a good career move for a civil servant to have renewables anywhere on the CV. The Government has also proved via its recent announcements that it has little support for this sector and intends to remove its financial support and then let it ‘wither on the vine’ - so to speak.
Solar Power Portal reports on the fact that the rumours about DECC are being aired in public now, such as by a question to the Chairman of the independent Committee on Climate Change:
This week there are a number of big announcements to report, all covered by Jamie Hailstone in the news. The first is the Government’s continued support for the Hinkley C nuclear power station and George Osborne’s trip to China to court their money to invest in it. Simon Jenkins of the Guardian published a withering attack on the Government’s double standards. It is funding fossil fuels to a massive extent, whilst at the same time telling the renewables industry there is no money left:
The second was that Drax is abandoning the carbon capture and storage project (CCS), claiming that it can no longer afford to invest in it following the withdrawal of subsidies. This was one of only two such projects that have survived the last five years, which were intended to prove the concept. The former Government said that it had put aside £1bn to prove this technology and therefore permit the continued burning of gas and coal. This is therefore yet another aspect of the green agenda that is heading for disaster. I am not personally sorry to see this go, as I never believed that CCS was the real answer in the face of renewable energy, which does not involve fossil fuels at all.
The rumour mill is clearly in full swing about the latest proposals on financial incentives and everyone is clutching at straws. Last week one such rumour came to my attention, which did surprise me. It came via a meeting with a Conservative backbench MP and Merton Power. This is what was reported to me:
“The Government is listening to the flack it's receiving over its proposed evisceration in January 2016 of the Feed in Tariff, Wimbledon's backbench Tory MP assured Merton Power this morning. Stephen Hammond, formerly a junior transport minister under the Coalition, explicitly advised solar supporters to expect an announcement before the 23 October end of the consultation period - "in the next 2 or 3 weeks",” he said.
“Likely content of such an announcement would be a FIT rate of around 4 or 5 pence per kWh, plus new incentives - unspecified - to stimulate battery storage for home & commercial installations of solar PV. A draft paper Hammond has seen in Whitehall in the past week sets out these options. In front of my witness, Hammond even promised to send me a copy, "when he could". Hammond has received 'many' submissions on FITs, and has had 3 meetings about FITs with 'ministers and others' over the past fortnight, including an hour-long meeting yesterday, 23rd September.
“Hammond said these revised proposals were emanating from 'the very highest sources in government', but wouldn't confirm any of Cameron, HM Treasury or DECC were supporting them.”
Further interrogation of my sources at DECC resulted in the conclusion that there is no truth in this whatsoever. The cuts are coming because the budget is overspent and George Osborne has taken the political decision that balancing the books takes precedence over literally everything else. I suppose that it is predicable that someone will say this and someone will say that, but the brutal truth is that there is not going to be a happy ending to this sad tale.
However, Solar Power Portal reports that the tide may be turning with some very influential people now starting to question openly the new Government’s stance in the UK. This is particularly stark, bearing in mind the impending Paris summit in December, where the UK has stated its intention to seek further emissions cuts and a global, legally enforceable deal. This does not seem to fit with its domestic energy policies:
Boris Johnson, elected Mayor of London, is one of those voicing strong concerns, as Energy Live News reports:
The Committee on Climate Change is an independent body established under the Climate Change Act 2008 but its Chairman Lord Deben says that cutting subsidies does not create innovation:
This is real criticism from people who matter. And criticism is mounting on new Energy Secretary Amber Rudd, including from her own backbench MPs: http://www.solarpowerportal.co.uk/news/decc_officials_come_under_fire_as_political_opposition_to_fit_proposals_217
Against this backdrop, renewable energy is doing rather well, largely due to the subsidy regime. The REA has confirmed that the recently published Quarter 2 Energy Trends and Energy Prices, published by DECC revealed renewable energy overtook coal for the first time in the UK’s electricity mix. It said that 25.3% of the UK’s power came from renewable sources in the three months to June whilst electricity generated from coal decreased to 20.5%. This is a real milestone and shows what can be achieved with proper financial support.
The REA summarized the position in this report:
This was also reported in Solar Power Portal:
When looking at personalities, readers will have noticed that I have focussed heavily on George Osborne, the Chancellor of the Exchequer. This is because he is undoubtedly calling the shots at the present time. On the other side of the House, the Labour Party has now confirmed its energy team, following the election of Jeremy Corbyn as leader. Most important is that Wigan MP, Lisa Nandy, will be Shadow Energy Secretary:
And the stick for Corbyn himself continues apace. He is under attack from the press particularly, with concepts such as his views being an 80’s throwback gaining currency. However, Energy Post carries a thoughtful article by Stephen Hall, a Research Fellow at the University of Leeds, saying that in relation to his energy policy at least, this is not true.
“It is clear from the manifesto that the energy policies of the Corbyn camp are anything but a throwback to monolithic state utilities. There is potential for more competition through more diverse energy business models, a clear willingness to make space for smart energy innovation, a call for different approaches to energy system finance, and a platform for more plural approaches to energy governance.
“Whether or not people agree with these proposals, it should be clear that they are not “old solutions to old problems”, but provocative responses to increasingly urgent challenges.”
This article is worth a read and you can find it here:
We have focused since the General Election on the policy changes to renewable energy and the green agenda. It seems that the Energy and Climate Change Committee in Parliament has now launched an inquiry into energy sector investor confidence following these recent policy changes. The inquiry seeks to establish what can be done to contribute to investor confidence in the energy sector, as well as build an understanding of how DECC’s policy making process impacts investor decisions.
Details are on the Parliament’s webpages:
But Ed Davey obviously shares my confidence that the green energy market will continue. It was always clear that I make my living from this sector, but now the Guardian confirms that Ed Davey will too, with various appointments to consultants and lawyers:
Solar Power Portal also commented on these appointments:
But in the meantime, the UK has fallen in the EY attractiveness to do business index for renewables:
Of course, most of the coverage of both the FITs review and the ROCs proposed changes, which are considered under the Legal and Finance section below, are about solar PV. The two community schemes mentioned under Community Energy are also solar based. Which goes to show that there is more solar PV being pursued as a renewable energy than any other technology, particularly in the public sector.
Last week APSE Energy published a paper that I have written on the Medium Term Strategy on solar PV. I have had a number of emails and approaches in relation to this piece, which seems to have touched a nerve. If you have not seen it, is available here:
One of the central premises of the paper is that costs are definitely going to continue to go down. In support of this point, PV Insider website reports on a recent analysis by the European Photovoltaic Technology Platform (EUPVTP). This claims that the levelised cost of electricity (grid parity to you and I) of solar PV in the European Union could fall by 30%-50% by 2030, putting it on a par with wholesale electricity prices in almost all EU markets. This is further evidence of the strength of the medium term strategy to get local authorities ahead in the solar PV race that will accompany grid parity:
The BBC carried a piece on how biomass reduces fuel bills. The Minsteracres Christian Retreat Centre had an annual oil bill of over £28,000 and is currently saving £15,000 per year:
It seems to me that biomass is not really getting the exposure that it should do. Jamie Hailstone reports this week on the call by the UK’s biomass industry for a more joined up approach to agricultural and energy policies.
Biomass offers huge potential to local authorities, particularly in terms of saving costs on heating their premises.
I have followed the successful book on Solar PV with second book in the Public Sector Energy series, called A Guide to Biomass Heating Projects in Local Government and the Public Sector. It is available from APSE for the modest cost of £25 per copy and explains fully how to harvest the benefits.
The BHA reports that the Ham Hydro scheme on Teddington Weir in London, which has already been consented by Richmond Council, is to be challenged by Judicial Review by the Lendsbury Club, one of the most prestigious hotels on the riverbank. As usual, it says that it is not against hydropower per se, just this scheme. The Standard reports:
Green Deal & ECO
Green Deal is still up in the air, as the review of policy continues. This week, Jamie Hailstone reports on the ResPublica report calling for different measures to replace the beleaguered scheme. Suggestions are that help to improve loans or stamp duty discounts might be used.
The trouble is that these both involve finance and therefore George Osborne. Good luck with that proposal then….
Finance & Legal
The FIT review is still ongoing and DECC is to hold three FIT review workshops, which are below. The dates for the workshops are: Cardiff: 28th September 13:00-15:30; London: 5th October 10:00-12:30; Edinburgh: 13th October 09:30-12:00.
I don’t know anyone who really believes that the changes are not going to come in as proposed, but it is always worth hearing what DECC have to say. See them whilst you can, as it were.
Still on FITs, there are many questions about the actual practice of removing pre accreditation from FITs from 1 October 2015. This can be quite complex and so OFGEM has issued a Q & A document on this. I have been asked a number of questions on this myself as part of my work and this is a useful guide:
And the criticism of the proposed savage cuts to FITs rages on unabated. The Renewable Energy Association said that UK solar cuts will cost the Government £100m in the long run. It claims that its analysis has revealed government proposals to cut the feed-in tariff by up to 87% could cost the UK almost £100m in lost tax and National Insurance revenue as well as additional welfare payments.
Turning to ROCs, that consultation exercise is also still ongoing, with announcements expected from HM Government soon. It was well known in the industry that the Scottish Government was committed to retain the ‘grandfathering’ principle under the Renewables Obligation (RO) for solar projects. Now, in a letter published on 23 September 2015, it has confirmed publicly that this is the case. The news comes as DECC announced the removal of the grandfathering guarantee in England and Wales. It has also confirmed that it will not re band ROCs either before April 2016. Rebanding will take place in England and Wales, with a reduction in rates being a certainty.
However, the Solar Trade Association confirms that this will not affect the proposed closure of the Renewables Obligation as a whole as of next April - that is a decision for the UK Government and DECC and applies across Great Britain. But within the RO, decisions on grandfathering policy and banding reviews are a matter for Scottish Ministers.
Here is the formal statement:
Business Green also reported on this story:
As did Solar Power Portal:
The key now is to invest in renewable energy projects with no Government subsidy. This is, in essence, what my medium term strategy document is proposing. There are a large number of positives to this strategy and not just for local authorities. For a start, George Osborne should be delighted about the prospect of more renewable energy that he does not have to pay for (save for the potential impact on his father in law’s business as a fossil fuel consultant). For local authorities, it means that they can avoid a lot of bureaucracy that comes from the financial incentives machinery. Here Solar Power Portal thinks along similar lines, with some developers saying large sites are already possible:
Electric Vehicles & Transport
The story of last week was the furore surrounding the admission by Volkswagen that it had inserted software in its diesel vehicles that could cheat on emissions tests carried out under strict environmental standards. I doubt that w have heard the last of this and if one manufacturer is doing it, the likelihood is that others are too. Here, Green Car Reports muses why VW did this:
And the EPA has said that it will ‘up its game’ for testing from now on:
Meanwhile, the future for EVs looks solid, with a million sales of electric vehicles now registered globally. The Hybrid Cars website reports:
In this week’s news, Jamie Hailstone reports on Plymouth City Council and its planning consent for a 4 MW community solar farm. It is said that the work is now hoped to move into the next phase. They will have to be quick if they are to build it out by April 2016, which is a necessity if they want the financial incentives.
Meanwhile, a community-owned solar cooperative in Hackney, London, has urged the Prime Minister not to cut financial incentives or small scale community projects like their own will be sacrificed:
Its own project is nearly complete and it is holding party to celebrate. The event will include a chance to meet the people behind its success, including young interns from the estate, as well as a ribbon-cutting ceremony and a party with complimentary food and drink.
According to the press release, the Banister House community solar project has been developed by Repowering London in partnership with local residents and Hackney Council, and delivered using funds raised through shares bought by local residents and others. The solar array is the result of much hard work by partners as well as interns, aged between 15 and 21, who have been taking part in paid work experience over the course of the project and learning about the IT, technical, legal, structural and media elements of the community-owned energy process.
Now, with installation underway and the completion date approaching, they are celebrating, not only what has been achieved over many months, but also the ongoing benefits that the community will receive from the project. Once commissioned, the 102kWp solar array will generate up to 82,000 kWh of energy annually, saving 50,000 kg of CO2 emissions.
And also reported last week by Jamie Hailstone was the first split community and commercial solar farm project, promoted by Swindon Commercial Services:
And finally …..
The ideal children’s story to be bought by any parent wishing their offspring to grow up with the right ideas about the world: the electric car, driven by the rodent who loves it! Again, only in America…..