Public Sector Energy Editorial 3 November 2015

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


Policy & Strategy

The Intergovernmental conference in Paris is now only weeks away and we can expect much more to be said and written about it in the interim period. Here, Energy Post provides a piece by two authors from the University of Melbourne in Australia that suggests that most nations need to at least double or even triple their efforts in order to keep global warming within the safe limit of 2 degrees above pre industrial levels:

http://www.energypost.eu/test-countries/

The issue is how much each country will accept in emissions reductions compared to other countries and their emissions history. There are different theories of how each share should be calculated (eg per capita or total emissions etc) and this is mainly what the wrangling is about.

Back home, David Cameron thinks that the UK should be powered by Icelandic volcanoes, according to the Daily Mail. The plan is to link the two countries by 750 miles of undersea cables so that the UK can benefit from Icelandic clean electricity from hydro and geothermal sources. The REA applauds the concept of greater interconnectivity between countries but questions the cost of this project, compared with generating the power here from renewable sources:

http://www.dailymail.co.uk/news/article-3294421/Could-UK-homes-powered-Icelandic-volcanoes-750-mile-long-cable-deliver-clean-energy-country-Britain-reducing-bills-decades.html?utm_source=REA+Members+Mailing+List&utm_campaign=4dddcc05c1-151028_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-4dddcc05c1-250326797&ct=t(151028_REA_Newsletter)&mc_cid=4dddcc05c1&mc_eid=b07cc4415d

The position in terms of national politics has changed seismically since the General Election. The Coalition Government has gone, the Liberal Democrat influence on the Conservatives along with it. The claims of ‘greenest Government ever’ have not been repeated. David Cameron has receded and George Osborne has come to the fore. His ambition to become the next Prime Minister is clear for all to see and his legacy will, he thinks, be built on the economics of the sorting the deficit.

He has attacked renewable energy support on a financial case (although this can be questioned - see the Good Energy report mentioned below) and openly distrusts the Department for Energy and Climate Change. Instead, George Osborne wants to see energy as part of infrastructure and the responsibility of another Government Department.

It is therefore important to see the plans for the National Infrastructure Commission as they are formed. As Jamie Hailstone reported in this week’s news, an eight person commission under the leadership of Lord Adonis will determine how to spend £100 billion on infrastructure during this Parliament. This will at least partially be funded by a suite of asset sales, something that local authorities will rightly be wary of. Part of the brief will be to explore how the UK can balance supply and demand of energy and aim for an energy market where prices are more reflective of costs to the overall system. EcoBuild Industry Insider reports:

http://www.ecobuild.co.uk/sustainability-news?bid=5153514&cid=94142&seg=Cell1&lid=117732

As mentioned above, I have highlighted before a report by Good Energy on the real cost of energy and the value of the renewable energy subsidies. This is covered by Good Energy in its recent newsletter:

http://www.goodenergy.co.uk/blog/articles/2015/10/30/renewables-bringing-down-the-wholesale-cost-of-electricity?utm_campaign=eNews+Oct+2015+-+Customer&utm_source=emailCampaign&utm_medium=email&utm_content=

I have now read the full report (which is only 10 pages long) and the points made by Good Energy are persuasive. Crucially, if the view is taken that there are other benefits from increased renewable energy deployment, which are thus far unquantified, if we were to quantify them and take them into account, there may not even be an overspend on the Levy Control Framework. This has, of course, been used as the main driver for the cuts to financial incentives. It is also the case that the more deployment that takes place, the greater the effect on the wholesale price of electricity and so the benefit to the public.

The full report is worth reading and is here:

http://www.goodenergy.co.uk/media/W1siZiIsIjU2MjRkMWRkYjBkY2Y3MDAwYzAwMjZkMyJdXQ/WindandsolarreducingconsumerbillsAninvestigationintotheMerit....pdf

Staying on the subject of the Government, the Telegraph ran a story saying the DECC Minister Andrea Leadsome had asked whether climate change was real when she was appointed to the job. Apparently, she is NOW fully persuaded that it is. Phew, what a relief! A Government Minister, in the ministry of climate change, not being sure that the subject of her entire department was actually real. You couldn’t make it up could you?

http://www.telegraph.co.uk/news/earth/environment/climatechange/11957478/Is-climate-change-real-asks-energy-minister-Andrea-Leadsom.html?utm_source=REA+Members+Mailing+List&utm_campaign=4dddcc05c1-151028_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-4dddcc05c1-250326797&ct=t(151028_REA_Newsletter)&mc_cid=4dddcc05c1&mc_eid=b07cc4415d

Solar PV

A while back the Government changed the policy emphasis in solar PV from fields to roofs. It told the big developers, such as Lightsource Renewable Energy Ltd, that they should be changing the focus of their operations. It is therefore surprising to hear that the Government has not followed its own advice and its estate has still not entered into a single roof top scheme. Solar Power Portal reports:

http://www.solarpowerportal.co.uk/news/revealed_government_yet_to_install_any_rooftop_solar_on_estate_2356

Also, National Association of Professional Inspectors and Testers has indicated that 70% of solar businesses in the UK will go out of business if the FIT rate cuts are transferred into law:

http://www.solarpowerportal.co.uk/news/napit_warns_70_of_uk_solar_businesses_under_threat_from_fit_cuts_1264

Any change in policy will not be able to save the fourth UK solar company to close. Zep Solar UK has a link to billionaire Elon Musk, of Tesla fame, and blames the Government’s policies on renewables:

http://www.theguardian.com/environment/2015/oct/16/solar-firm-blames-subsidy-cuts-for-uk-exit

And a very personal report by Howard Johns of Southern Solar, which was one of the first to go, reported in the Guardian:

http://www.theguardian.com/commentisfree/2015/oct/18/southern-solar-power-industry-company?CM

However, the cuts have not yet come into force and it is likely that this will now be the end of January 2016 or later, dependent on Parliamentary timescales. In the meantime, the number of installations in the UK has now reached 750,000, according to DECC figures.

This is a rise of 27% on last year and proves that there is going to be a huge gold rush between now and the end of the FITs when every client and every fitter will try and complete every possible job in time. This ‘boom and bust’ culture has been criticised again and again, but DECC does nothing to prevent it. It does not result in the best quality work and creates huge pressure on the industry.

Solar Power Portal reports:

http://www.solarpowerportal.co.uk/news/fit_installations_top_750000_as_decc_records_27_pre_degression_boom_6448

One of the areas on show at the recent Solar Energy UK event in Birmingham was the concept of the floating solar array. Many people might see these as pie in the sky and unrealistic, but they are likely to play a full role in the future.

Now United Utilities has appointed solar contractor Forrest, in conjunction with Floating Solar, to construct a floating solar power system on Godley reservoir in Greater Manchester, which is the largest in Europe.

The project will be valued at £3.5m and have a total capacity of three megawatts consisting of 12,000 solar panels. These will be floating on the reservoir's water and will cover an area of 45,500 square metres - making it the second largest floating solar array system in the world.

There is an interesting photomontage on Forrest’s website that is worth a look:

http://forrest.co.uk/news/united-utilities-appoints-forrest-to-deliver-europes-largest-floating-solar-power-system-on-godley-reservoir/

Wind Power

The REA reports that amendments were added to the Energy Bill in the Lords from Labour and the Liberal Democrats, which have the effect of removing the Government’s intended closure of the Renewables Obligation scheme to the technology a year early. But the REA continues that the implications of this are as yet unclear as the Bill still needs to progress through the Commons.

In the meantime, DECC has extended the grace periods for onshore wind projects that do not meet the 2016 deadline:

http://www.regensw.co.uk/blog/2015/10/decc-extend-ro-grace-periods-for-onshore-wind/

Jamie Hailstone also reports in this week’s news, that the world’s largest offshore wind farm will go ahead after a final investment decision is made by Dong. The Walney wind farm in the Irish Sea will boast 1,027 MW of capacity when completed. Mind you, the energy is not cheap, with a CFD for £150 per MW being approved by the Government for the first 15 years of the site’s operation:

http://www.ecobuild.co.uk/sustainability-news?bid=5153514&cid=94142&seg=Cell1&lid=117732

Hydropower

The British Hydropower Association has submitted a response to DECC as part of the FIT review. It makes the point that, whilst it accepts the need for a review, the impact on hydropower schemes is disproportionate.

The BHA has said that it has many concerns about the impact of this proposal, as well as the recent removal of pre-accreditation, on the hydro sector. Hydro is different to other technologies. It takes around 18 months to develop and two years to build a typical hydro scheme.

In its response three key areas of concern are addressed:

Investment; Hydro has 8 quarters of potential 10% degressions between financial close and commissioning. Without some form of pre-accreditation very few investment committees, or bank providing debt financing, could reach a decision to fund a project on this basis.

Economics; The proposed tariffs are now too low to support future hydro development as very few projects will be economic.

Timing; The FIT proposal covers 13 quarters to March 2019, whereas the development and construction cycle for a hydro scheme is 14 quarters. Only those schemes currently in development will be able to deliver in the proposed timescales.

It therefore points out that as a result of this further new development in the UK hydro industry would reduce to a very low level with the associated loss of jobs and rural development opportunities. It says that DECC has been receptive to its arguments, but whether there will be any changes to the proposals remains to be seen.

Wave & Tidal Power

As reported by Jamie Hailstone in this week’s news, there has been bad news for marine energy when it was announced that marine energy company Aquamarine Power has called in the administrators. The REA issued a press release on this, claiming that it was another casualty of the political uncertainty created by the new Government:

http://www.r-e-a.net/news/marine-innovation-on-the-block-as-wave-energy-company-calls-in-administrators?utm_source=REA+Members+Mailing+List&utm_campaign=4dddcc05c1-151028_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-4dddcc05c1-250326797&ct=t(151028_REA_Newsletter)&mc_cid=4dddcc05c1&mc_eid=b07cc4415d

Energy Efficiency and Buildings

The Energy and Climate Change Committee in Parliament is to take evidence on home energy efficiency and demand reduction. Details on the Parliament website:

http://www.parliament.uk/business/committees/committees-a-z/commons-select/energy-and-climate-change-committee/news-parliament-2015/evidence-home-energy-efficiency-15-16/

It is good to see that the London Borough of Camden has developed 53 units to the Passivhaus standard in Highgate as part of the Chester Balmore scheme. This piece is an advertorial for the materials used, but does demonstrate that there are excellent sustainable building projects going on across the country. This one is part of Camden’s Community Investment Programme (CIP) to invest in homes, schools and community facilities:

http://www.barbourproductsearch.info/kingspan-koolduct-for-uk-s-largest-passivhaus-news037636.html?org=EcobuildNews%20

And as reported this week by Jamie Hailstone in the news, Cherwell DC has approved plans for one of the most sustainable housing developments in the country, to be based in Bicester. The houses on that estate will be true zero carbon, with solar panels and CHP heating.

Green Deal & ECO

London Mayor Boris Johnson claims that the closure of the Green Deal will not hit London’s energy efficiency plans. In response to a question, the Mayor responded by stating that he did not expect the Green Deal’s closure to “have a significant direct impact on my energy efficiency plans”, but also revealed that at the end of June 2015 London had just 106 Green Deal plans in action – 1% of the UK’s total.” Next Energy News reports on this story:

http://www.nextenergynews.co.uk/news/energy-saving/boris-johnson-confident-green-deal-closure-will-not-impact-londons-3434

Finance & Legal

The Renewable Heat Incentive has been on hold for a while now, bearing in mind the uncertainty about the future of the tariff. Of course, the system still exists, but no local authority is going to embark on a scheme that will take some time to come to fruition without some assurances that the tariff is actually going to be there at the end of the process.

There have been numerous announcements about FITs and ROCs and even CFDs; but nothing has been said about the RHI. This is because it is funded from general taxation and not the much-criticised Levy Control Framework. This does not mean that costs do not need to be controlled, though, but this is done via the Comprehensive Spending Review mechanism. As the CSR for 2015 is due on 25th of this month, all eyes will be on the Chancellor to see what he decides on the RHI.

In this estimated commitments document from DECC gives the current degression mechanism for the RHI, which will apply until then:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/324724/Domestic_degression_factsheet.pdf

Some fear bad news from that direction. There has definitely been bad news elsewhere on finance this past week. Jamie Hailstone reports in this week’s news that this is because an amendment has been made by the Government to the Finance Bill, which will have the effect of excluding community energy schemes from being able to benefit from tax relief under the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).

Furthermore, this exclusion is to be extended to the new Social Investment Tax Relief (SITR) mechanism. There is anxiety, therefore, that many community energy schemes that have already gained pre-accreditation under Feed-in Tariffs, will no longer be able to go ahead as investor confidence becomes critically undermined.

The Renewable Energy Association has prepared a briefing note on this latest policy proposal:

https://gallery.mailchimp.com/57981e55e365722b7bb40867b/files/151029_REA_Briefing_on_Community_Energy_Tax_Relief_Ammendment.pdf?utm_source=REA+Members+Mailing+List&utm_campaign=4dddcc05c1-151028_REA_Newsletter&utm_medium=email&utm_term=0_e5d7ecbe99-4dddcc05c1-250326797&ct=t(151028_REA_Newsletter)&mc_cid=4dddcc05c1&mc_eid=b07cc4415d

Meanwhile, the FIT consultation exercise closed last week. The criticisms continue to rain in, with Boris Johnson, Mayor of London, following up his verbal criticism of the proposals with a formal response to the consultation. Solar Power Portal reports:

http://www.solarpowerportal.co.uk/news/boris_johnson_slams_sharp_cliff_edge_subsidy_cuts_in_fit_consultation_2356

Electric Vehicles & Transport

One of the elements that has always fascinated me about renewable energy infrastructure is the ability to ‘join up’ different solutions. Here, Green Car Reports gives us the story of electric vehicles powered by wind energy in the Hebrides islands in Scotland:

http://www.greencarreports.com/news/1100708_wind-powered-electric-renaults-for-rent-in-remote-scottish-hebrides-islands

The idea is not new, of course, and in the Green Cornwall Programme that I worked on in 2009, we had a fleet of EVs being powered by the Council’s solar farm at Newquay. But getting it to actually happen is much harder, as is demonstrated by so few fully holistic programmes across the UK.

One of the big issues with electric vehicles is the different types of charger available. This is discussed in this article:

http://www.greencarreports.com/news/1100698_where-are-electric-car-dc-fast-charging-stations-depends-on-the-car

Fortunately, there are not too many different types of charger, but there are more than one. This is pretty frustrating if you are on a four-charger bay, but only one of them fits your car (and that is occupied)!

And taxis are also being included in the development work on EVs. Here the traditional London cab is soon to be updated with a zero emission model, with the help of the Chinese:

http://www.greencarreports.com/news/1100655_londons-black-cabs-to-be-range-extended-electrics-with-chinese-help

Energy Storage

As energy storage continues to come to the fore, the Institution of Civil Engineers (ICE) has prepared a report – ‘Electricity Storage: Realising the Potential’. This was launched last week and the ICE has called on the industry and Government to work with regulators to "breathe life" into the current ‘stunted’ industry. The ICE website explains the report:

https://www.ice.org.uk/news/ice-electricity-storage-report

And the full report is here:

https://www.ice.org.uk/getattachment/media-and-policy/policy/electricity-storage-realising-the-potential/ICE-electricity-storage-re-realising-the-potential.pdf.aspx

Fossil Fuels & Nuclear

The Hinkley Point C new nuclear power plant decision is likely to be the subject of reams more of newspaper articles and comment. In this article published in Energy Post, two Professors from Robert Gordon University in Scotland argue that the project represents not just a colossal waste of money, but could also be real danger to the UK’s national security:

http://www.energypost.eu/hinkley-point-c-boondoggle-dangerous-waste-money/

Community Energy

RegenSW reports that pressure on the Government over community energy is rising with over 30 community energy groups across the south west telling their MPs that government cuts to renewable energy subsidies will lead to the loss of jobs and investment in their constituencies:

http://www.regensw.co.uk/blog/2015/10/community-energy-groups-lead-mass-lobby-of-mps-on-drastic-renewables-cuts/

Solar Power Portal also reported on these ‘extremely damaging’ cuts:

http://www.solarpowerportal.co.uk/news/extremely_damaging_community_energy_tax_relief_u_turn_to_have_3523

Stephen Cirell