This article was first published in Renewable Energy Focus magazine. For a free subscription, click here. This is the online version, and will be published in 3 parts.
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The Renewable Obligation Certificate (ROC) regime and the way different ROC multiples were applied to different technologies “worked very well”, Altium's Adrian Reed continues. It was, he adds, “right and proper” that the multiple for technologies like onshore wind should reduce over time as they become more cost-competitive. “Once the market is up and running and it's got some infrastructure in place, market forces should take over, and start driving down the cost of installation, driving down the cost of equipment manufacture, and moving to a point whereby the overall balance of the costs within the broader mix of energy are justifiable on their own means.”
The key, he says, is not to pull the rug out from under those that still need support, as the UK government has done, notably affecting solar PV and AD in recent times. “The UK government did actually quite a good thing on the feed-in tariff for PV, but then as soon as it looked like developers might make too much money on it, they knee-jerked and changed the incentives policy,” he notes. While the solar industry is starting to bounce back, government could have simply “tailed it down slowly, then they would have had more people ready with the momentum and the capabilities in place to switch over to a new incentive, which they can then reduce over a period of time.”
Reed insists that any policy needs to be realistic about the current status of technology and the related infrastructure it requires. “Would anybody be looking to build out wave and tidal plants at the moment if it was a one ROC play? They would not,” he notes. “If you look at the money that's being spent on some of these technologies, it's running into tens and hundreds of millions.
“What the industry is looking to do is bring down the installed cost of wave and tidal infrastructure to that of offshore wind by 2020. If you can get to that position, then the ability to roll out vast quantities of wave and tidal infrastructure in the UK, where we are leading the world, is huge, but you need something to support you in the meantime.”
Of course, timescales are crucial. A three-year cut-off point for support “would be too quick for something like offshore wind, or large-scale biomass, or some energy from waste plants,” he says, referring to his earlier comments on aggressive support measures. “All I think the market wants is horizons. That is, incentives, legislation or otherwise, that match the horizons of the relevant technology, and take account of where the relevant technology is in this market.”
And the government needs to get a move on to avoid stalling the market, he says, expressing concern that the EMR will not get priced in time to ensure the supply chain is in place to build the next rounds of projects when expected. For offshore wind it's a significant point. Projects not already in the planning process are unlikely to get built by 2017 and thus benefit from the ROC regime. “It's a three to four year planning cycle,” he says. “There's going to be a hiatus.”
Equipment suppliers along the supply chain will not invest in new production until they know projects will happen and demand will be there. This will lead to an inevitable bottleneck with demand outstripping supply, be it in terms of components or specialist vessels and installation equipment. “It means the marketplace, which should be driving down costs, will have costs going up…you end up several steps backwards, in terms of your ability to drive down costs. That's why there's that importance for certainty and continuity of legislation – not because we all want to make a fortune out of it; they just want to be able to put money to work,” Reed stresses.
“If there was certainty on funding and costs for the industry going forward, then fundamentally these things would be being built now because companies would know there would be a demand.”
Of course, the UK's industry is not alone in falling foul of political shenanigans. The US and German industries are also experiencing a similar political pounding – but unlike the UK, general elections are looming large in both of these countries, so to a certain extent it's what you expect.
And in Germany's case we are talking about a market which already gets 20% of its electricity supply from renewables and is now looking at how to ramp that up to 35% by 2020 and 80% by 2050.
Nonetheless, whether talking Germany, the US or the UK, the issue of support for renewables is, Reed says, too important to be used for political point scoring. It should be a non-political issue, he insists, with cross-party cooperation and consensus.
His frustration with the state of play in the UK is clear. “In Germany, they had a combination of tax incentives, feed-in tariffs and other regulatory drivers, and they've now got 20 gigawatts of solar, and 25 to 30 gigawatts of wind. You compare Germany with us, and what have we got?”
The same can be said when comparing the UK with the US and countless other countries, he adds. “We're still struggling with alternative generating 101, and everybody else is now onto advanced stage integration within their infrastructure and everything else.”
Reed went to a recent event held by the US Energy Storage Association in Washington, which only compounded his frustration further. “They've got a dialogue with the [US] government about storage, be it pumped hydro or compressed gas. There wasn't anybody from the UK [government] there. Why?”
Investors, he says, “are crying out for some sort of cohesive strategy and that requires more open dialogue”. They need certainty and “mechanisms that are agreed by the market, that government stands behind, and all political parties stand behind”.
The final part of this article is here..
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