Feature

Market: Is 2013 the UK's year of reckoning?


Rachel Parkes

Despite good figures on paper, how healthy is the UK on renewable energy deployment?

While most of the UK was settling into a post-Christmas haze, the elves at the Department of Energy and Climate Change (DECC) were not to be outdone on festive cheer. “UK renewables powers forward!” came the announcement from the press office in the closing days of December, adding that “significant progress” had been made.

There was no mistaking the feel-good message of the announcement: the UK's renewables industry is thriving in one of the toughest economic climates in living memory, and amid a myriad of regulatory reforms and cuts to support.

But is this really the case? Certainly, DECC's figures look good on paper. From July 2011 to July 2012 the UK has seen a 27% increase in overall electricity generation from renewables, taking the UK's total to 10% – just under a third of what it needs to achieve by 2020.

In addition, there was a 40% increase in renewable electricity capacity, including a 60% increase in offshore wind capacity to 2.5GW, and a five-fold increase in solar PV capacity. All in all, DECC said, the UK is “on track” to meet its 2020 target of sourcing 15% of its primary energy supply from renewables by 2020.

Roadmap optimisim

Meanwhile, the government also provided an update on its progress with achieving the goals outlined in the UK's Renewables Roadmap – originally released in 2011– aimed at facilitating progress to the 2020 targets. The list of aims and achievements is lengthy, covering everything from planning, radar, investment certainty and grid access to supply chain development, cost cutting and R&D funding.

James Hubbard, economics policy officer at RenewableUK, the trade body for wind and marine technologies, is optimistic about the UK's progress so far, but he highlights that a lot will depend on the Energy Bill, the legislative enactment of the government's Electricity Market Reform (EMR). “We're on track to meet targets, so we're pleased with that,” he says.

“The big issue of course is certainty, and that's what EMR is focusing on: trying to improve the investment climate so investors can make the big decisions that we hope are made soon, so that we're able to attract and secure large manufacturers. That's the big thing that's outstanding.”

The solar industry, too, is fairly buoyant at current progress, not least because PV was included in the roadmap for the first time. Cuts to support available to large scale solar PV under November's banding review for the Renewables Obligation (RO), the financial support mechanism for larger renewables developments until 2017, could have put a downer on things, yet the industry seems happy that the way is clear for more PV growth in 2013.

“We weren't delighted with the [banding review] outcome but our view was it could have been a lot worse and it's created the certainty that's needed over the next four years for the RO,” says Paul Barwell, chief executive at the Solar Trade Association (STA). “It allows large scale deployment and also roof mounted large scale to deploy at a much greater rate than originally proposed, so that is good news.”

Not everyone is confident

However, Gaynor Hartnell, chief executive at the Renewable Energy Association (REA), is less comforted by the government's progress. Chief amongst her concerns is the lack of cohesion in the coalition government, manifested by very public infighting between pro-renewables DECC and the pro-gas Treasury, which she believes has created a grim climate of uncertainty.

“The general feeling is that one hardly knows what's going on,” she says. “The government isn't really acting as one. That kind of uncertainty filters down quite deeply and I think a lot of people are concerned that there may be some undermining of the whole commitment to achieving the renewables targets.”

This, she says, makes investment extremely hard, citing as examples the UK's biomass generators – who stand to be hit with a 400MW capacity cap if current proposals go through – and the combined heat and power (CHP) industry, which is facing the first retrospective cuts to support in the UK's low carbon industries. This last case will be particularly damaging to investor confidence in the UK.

“If there was no uncertainty [about future levels of support] when the financial decision was made, then any lender that invested in that project will be scarred,” says Hartnell. “They'll have a different view of the UK as a consequence when making future funding decisions.”

Tomorrow - What can we expect from the year ahead?

About: Rachel Parkes is a freelance journalist based in the UK covering energy issues

Renewable Energy Focus, Volume 14, Issue 1, January-February 2013, Pages 4-7

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