By Kari Williamson
The RO in short
The Renewables Obligation pays renewable generators a premium which is additional to the income gained from the sale of the electricity. If the electricity price increases, renewable generators benefit.The UK Government plans to close the Obligation to new entrants in 2017, and instead award renewable generators (along with nuclear and carbon capture and storage generators) a new form of contract. This aims to pay a set tariff which will not fluctuate with electricity prices. This should deliver a saving if electricity prices go up.
Gaynor Hartnell, Chief Executive of the REA, says: “There is great relief that this document has finally been published. The delay had put billions of pounds worth of investment on hold. Developers will need to see these new numbers in legislation before they can resume development activity, however. We welcome the broad thrust of the proposals, although we have views on some of the details, which we’ll feed in to the consultation.
“The degression pathway is a new refinement to the Obligation. Renewables costs in the main are coming down, so it does make sense. Investment stability and certainty is crucial and is key to enabling the UK to meet its targets and for renewables to contribute to economic green growth, job creation and exports.”
Comments on specific technologies:
“Biomass stays at 1.5 ROCs/MWh, at least initially. This is welcome and biomass should see a renaissance. It has been out in the cold for some time, but Government has clearly signalled that it’s an important member of the renewables family,” Hartnell says.
“In the Renewable Energy Roadmap, it is envisaged to make a much greater contribution than before. This is due to its cost-effectiveness and potential for provision of baseload power. There will inevitably be tensions between competing uses for biomass – but that is not surprising given biomass is going to become an increasingly important commodity – it will eventually replace fossil fuels in all their uses. It is essential that only sustainable biomass is used, and it won’t qualify for the Obligation if it does not meet strict sustainability criteria.
“We’re not sure it helps to degress in the final year. If the objective is to incentivise rapid development, it won’t really help, as it adds risk with very little benefit. Project developers have every incentive of moving as quickly as they can – indeed they are straining at the leash!”
Solar photovoltaics (PV) cost coming down
“Solar PV stays at 2 ROCs/MWh, but will degress in line with offshore wind. With the cost of solar power plummeting, some of the very largest multi-megawatt projects, in the very sunniest parts of Britain are beginning to look economic if they can benefit from 2 ROCs/MWh. A more favourable rate would lead to greater diversity, however.”
Wave and tidal energy need a higher banding
She continues: “Marine renewables show tremendous promise for the future, but need higher banding levels if they are to contribute to our energy mix in the near term. Wave and tidal energy device development is an area where the UK has a great lead, and Government is keen to retain this. 5 ROCs creates an opportunity which will be seized upon particularly by those integrated companies developing both devices and projects, who already have experience of deployment of pre-commercial scale projects. We’re not convinced of the logic of a 30 MW size threshold, however.”
Disappointment for geothermal
“Geothermal developers will be deeply disappointed by this. It sends the wrong signal to investors, who had the impression that Government was looking to encourage this emerging technology.”
Wind remains strong
“Onshore wind developers should be able to live with this. It’s a modest reduction, but it will have an impact on smaller and community schemes. Offshore wind remains at the higher level introduced by the emergency review, which is welcome news, Hartnell says.
Energy-from-waste and landfill gas
“If the Government wants to encourage a greater contribution from the very cheapest technologies, this is the wrong way to go about it. New landfill gas projects are now out of the Renewables Obligation, and EfW plants with CHP, have had ROC levels halved. No new projects have been built since 2009, at the existing levels. Reducing them further cannot help.”