Public Sector Energy Editorial 27 October 2015

An analysis of the local authority energy market and the latest developments around the UK.


Policy & Strategy

The news has been dominated over the past week by the full state visit of the Chinese President and the signing of the new nuclear deal for the new Hinkley Point C reactor. The Guardian reported on the new £18bn deal, work upon which is to start immediately:

http://www.theguardian.com/environment/2015/oct/21/hinkley-point-reactor-costs-rise-by-2bn-as-deal-confirmed?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

The REA asked for clarification of Government policy following the signing of this deal. It has concerns about the financial incentive being given to the generator of £95 per MWh of power for 30 years. It points out that the CfD (Contracts for Difference) strike prices earlier this year demonstrated that the cost to the public for solar is already almost 15% less than for nuclear (on a per unit of electricity basis), but with shorter contracts and with costs continuing to decline. On that basis, it is difficult to see how this deal is the way forwards for the UK:

http://www.r-e-a.net/news/following-hinkley-point-c-nuclear-deal-rea-seeks-clarity-on-renewables-wider-energy-strategy?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

Meanwhile, the fallout from the changes to renewable energy subsidies continues to become clear. As Jamie Hailstone reports in this week’s news, the Chair of the Energy And Climate Change Committee has claimed that DECC introducing key amendments to the financial incentives in the summer recess shows a lack of respect to Parliament and its proper process. These are stinging criticisms.

Much of the controversy surrounds the job losses that are predicted following the changes. Here, the Independent looks at the substantial job losses that will directly flow from changes to FITs and ROCs:

http://www.independent.co.uk/news/uk/home-news/hundreds-of-renewable-energy-companies-could-be-forced-out-of-business-due-to-dramatic-subsidy-cuts-a6700466.html?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

The wider significance of this is not lost either, with the UN’s chief environmental scientist, Professor Jacqueline McGlade, warning that the cuts, coupled with tax breaks for oil and gas, are sending a “perverse signal” to the rest of the world ahead of a crucial climate change summit in Paris next month. BBC News reports on this:

http://www.bbc.co.uk/news/science-environment-34555821?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

A while back, I reproduced an article by the Guardian on the nine green policies that have been cancelled by the Government since coming to power. Now the Renewable Energy Association has updated the list, which demonstrates that 11 policies have been radically changed. These are represented in chart form and the link is here:

http://www.r-e-a.net/upload/uk_government_policy_changes_since_the_election_slide.pdf?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

The Government in Westminster is also pushing fracking and gas as part of its modern energy policy, whist visibly cutting back on everything to do with renewable energy.

This is bad enough for England, but is worse for the devolved administrations, particularly Scotland. It is now openly saying that it cannot meet its target of 100% renewable energy by 2020, largely due to Government policy in London. Energy Post notes that:

“If this continues, we imagine that Holyrood may well have to make the tough decision to publicly declare the abandonment of their renewable and world leading climate change targets, blame London for it, and highlight how it could be different if Scotland had autonomy on these issues.”

Energy Post concludes that his will bring the two governments on to even more of a collision course:

http://www.energypost.eu/uk-governments-delusional-energy-policy-means-scotland/

So the Westminster Government is going backwards on climate change and renewable energy and is being seen to do so just before the crucial intergovernmental conference in Paris in December. International figures like Al Gore have questioned the Government’s new stance and it will be difficult for it to claim that it is leading by example, with all this negative activity going on in the background.

This is not helped by the Committee on Climate Change, an independent body set up under the Climate Change Act 2008, which has the role of advising the Government. Under the Act’s provisions, five yearly carbon budgets have to be agreed and implemented and the Fifth Carbon budget, to run between 2028 and 2032 is being considered. The REA comments that the CCC’s latest report ‘Power Sector Scenarios for the Fifth Carbon Budget’ reveals that low-carbon electricity from wind and solar farms will be cheaper than gas and effectively subsidy-free by 2020:

https://www.theccc.org.uk/publication/power-sector-scenarios-for-the-fifth-carbon-budget/?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

The Guardian also picked up on this point:

http://www.theguardian.com/environment/2015/oct/22/wind-and-solar-power-likely-to-match-gas-on-cost-by-2020-say-uk-climate-advisers?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

As did Solar Power Portal:

http://www.solarpowerportal.co.uk/news/solar_and_onshore_wind_will_be_cost_competitive_with_gas_by_2020_claims_235

So it is even more difficult to understand the Government’s insistence on moving forwards on hugely expensive nuclear energy projects.

The next few months, running up to Christmas, will be an interesting time for those observers of Government policy, bearing in mind the conclusion of some important consultation exercises, mounting international criticism of its new stance, the Paris summit and the progress of the UK against its EU targets. George Osborne’s resolve is likely to be fully tested during this period.

Solar PV

This article in the Daily Record in Scotland reveals that North Ayrshire Council is planning to build two solar farms in Irvine, both on former landfill sites. There is no doubt that solar farms are newsworthy items and the piece reflects that the deadline of 31 March 2016 is looming. Of course, Scotland is in a preferable position to England on the completion of solar farms before April 2016:

http://www.dailyrecord.co.uk/news/local-news/plans-revealed-two-irvine-solar-6689937

And Jamie Hailstone reports in this week’s news that there are moves afoot to try and increase the level of solar PV in London, where the take up is very low. The GLA wants local authorities to do more to encourage this.

Wind Power

As Jamie Hailstone reports in this week’s news, even where the planning inspectors think that planning consent should be granted for a wind farm, the Secretary of State can still call in the decision. In that story Greg Clark called in the decision on the Staffordshire application and then refused it as not being in conformity with Government policy.

It’s very depressing for those involved in onshore wind to see the political environment so stacked against them.

Finance & Legal

The deadline for the FIT consultation passed on Friday night and my prediction will be that there will be many responses to DECC.

I have reproduced the APSE Energy document as a news item this week and this makes reference to, and is in support of, the REA’s response. On the solar side, the Solar Trade Association has also submitted a detailed response, which can be found on its website and is here:

http://www.solar-trade.org.uk/wp-content/uploads/2015/10/STA-response-to-FiT-Review-Consultation-October-2015.pdf

The STA response makes reference to the organisation’s “£1 Plan”, whereby a sustainable solar PV industry can be maintained for just £1 on electricity bills:

http://www.solar-trade.org.uk/wp-content/uploads/2015/10/STA-Counter-Proposal-v1.4-Summary.pdf

Predictably, legal action has been threatened and Solar Power Portal reports that this has now materialised. What this usually means is that DECC has received a ‘letter before claim’ which is a mandatory step that anyone seeking to challenge a Government department by judicial review, needs to go through. It also means that the legal action is real rather than just possible, and that court hearings will follow:

http://www.solarpowerportal.co.uk/news/decc_confirms_legal_action_has_begun_over_fit_changes

On the finance side, a new report by Good Energy indicates that the full benefits of renewable energy are not being recognised in the Levy Control Framework. The report ‘Wind and Solar Reducing Consumer Bills – An Investigation into the Merit Order Effect’ says that there are huge benefits that are not being taken into account.

The main findings of the report are as follows:

• Wind and solar generators reduced the wholesale cost of electricity by £1.55 billion in 2014

• In net terms, the cost of supporting wind and solar generation in 2014 was £1.12 billion – 58% less than the cost reflected in the Levy Control Framework

• The value of the Merit Order Effect will increase with further renewable deployment – the current level of savings suggest that, if renewable support was viewed in net terms, the projected future overspend of the Levy Control Framework may not be a reality

• If existing savings are maintained, future planned renewable development may deliver net benefit (in cost terms) to the consumer

This press release summarises the position:

http://www.goodenergy.co.uk/press/releases/2015/10/19/renewables-bring-down-the-wholesale-cost-of-energy-finds-new-study

And a new report by KPMG, commissioned by a group of companies, including Lightsource Renewable Energy Ltd, with contributions by UK Power Networks and Tesla, indicates that if support under the Levy Control Framework were to be rescheduled and reorganised (but not increased), the UK could develop a decentralised energy system based on solar PV and storage:

http://www.solarpowerportal.co.uk/news/uk_can_cut_bills_with_decentralised_solar_plus_storage_strategy_new_report

Meanwhile, well-known renewable energy company Ecotricity is launching its financial product ‘Ecobond 3’. Five years ago the first Ecobond was launched, and followed by a second the year after. They both raised £10m for projects, being contributed to by individuals that did not want to have solar panels on their roofs or a wind turbine in their garden.

The idea, they say, is to allow people to share in the green revolution, and at the same time cutting out the middlemen, the bankers who generally charge much more to borrowers than they pay to savers.

Ecobond 3 will finance six new wind and solar projects, which have already been started:

http://www.ecotricity.co.uk/about-ecotricity/ecobonds

Electric Vehicles & Transport

Green Car reports indicates that even though sales of the Nissan Leaf have not reached 2009 predictions, much higher sales will be achieved due to a "breakthrough battery" with a range of 200 miles. We are told that this will emerge within the next few years.

According to the website, the battery is widely expected to be offered in the second-generation Nissan Leaf, to be introduced as a 2017 or 2018 model. Read the report here:

http://www.greencarreports.com/news/1100581_battery-breakthrough-to-boost-nissan-electric-cars-to-one-in-10-sales-around-2020-exec-says

But this will change over time in any event, as younger people value EVs more highly than older motorists:

http://www.greencarreports.com/news/1100611_younger-car-buyers-in-u-k-want-electric-cars-far-more-than-older

And in the week that sees the new James Bond film released, here is a sneak preview video of the Aston Martin EV, which will compete at the top end of the market. I don’t think that the hero drives this car in Spectre though!

http://www.greencarreports.com/news/1100580_all-electric-aston-martin-rapide-now-this-is-a-tesla-competitor-video

Fossil Fuels and Nuclear

Of course, there are always winners and losers in any policy choice and the community in which the Hinckley Point development will take place, in Somerset, is naturally pleased that it will get a large influx of investment and potential jobs. This is reported on this week by Jamie Hailstone in the PSE news. Such sentiments are not really reflected elsewhere in the country, where it is the burdens that are more the focus, such as the huge clean up costs borne by the taxpayer.

Community Energy

The local authorities involved in renewable energy and low carbon schemes recognise the importance of community involvement at local level in this agenda. Even though many authorities are undertaking schemes on their own land that benefit them financially, the see the benefits that more community led schemes can generate and generally want to support them.

So the proposed changes to the Feed in Tariffs, in particular, have hit the community sector hard. Here, Community Energy England reports on the potential benefits from community projects and the impact the FIT cuts will have. Local authorities will recognise these benefits, as they mirror the ones from civic schemes:

http://communityenergyengland.org/members-area/data/community-energy-generating-more-than-community-energy/?utm_source=REA+Members+Mailing+List&utm_campaign=e6f831449e-151022_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-e6f831449e-250326797&ct=t(151022_REA_Newsletter)&mc_cid=e6f831449e&mc_eid=b07cc4415d

This report suggests that the community sector is deeply disappointed by the proposed changes and that this has caused many people involved to start to question whether the Government’s ‘Big Society’ initiative is worth the time.

The full report from Community Energy England is here:

http://communityenergyengland.org/wp-content/uploads/2015/10/CEE-Survey-2015.pdf

And Jamie Hailstone reports in this week’s news that Gloucestershire County Council has resolved to contact the Secretary of State to seek protection for civic and community led renewable energy schemes. It seems to be to be very unlikely that this will result in a change of position. It is difficult to conclude anything other than DECC has made up its mind on these changes and is just trying to ride out the inevitable storm that will accompany the changes.

Recycling

The website Packaging News reports that Scottish use of plastic bags has reduced by 650m since a charge was introduced for new plastic bags in supermarkets. This represents a drop of approximately 80% and has resulted in £6.7m being donated to charity:

http://www.packagingnews.co.uk/news/environment/scotlands-single-use-carrier-bag-usage-drops-by-650-million-20-10-2015?utm_source=www.circulareconomynews.com&utm_medium=referral&utm_campaign=www.circulareconomynews.com

And finally …..

An electric vehicle that can save your life – literally! See this case where a tree crushed the Tesla but the occupants escaped unharmed!

http://www.greencarreports.com/news/1100621_tesla-model-s-saves-woman-child-in-landslide

Stephen Cirell