Key Issues facing Wind, Wave and Tidal Energy in the UK

BWEABWEA’s Policy Team takes a look at the current challenges in the UK and more importantly, at some of the proposed solutions.

Key Issue: Grid

Without significant changes to how the electricity network in the UK is built, managed and paid for, our ability to take advantage of the UK’s massive renewable resources will be seriously impaired.

Briefing

If 2020 targets are to be met, Government needs to ensure all actors are playing their part in an overall plan, to a strict timetable.

The UK high-voltage electricity grid was built after the Second World War around large generators, transporting power from central locations out to dispersed consumers. To exploit our huge resources of renewable energy, we need to build new grid out to where these resources are, primarily on the periphery. We also need to reform the regulatory arrangements under which generators connect to the grid, the terms of which do not reflect the ways that renewables and wind in particular, differ from large thermal generators.

The grid as we know it was mostly paid for when the industry was nationalised, so all users paid equally to build the network. Since privatisation, new generators who need grid extension to connect are expected to pay for that work, making wind the first type of generator to pay for the entire cost of its infrastructure.

The solution

The need to strategically plan and deliver new grid infrastructure has been recognised, and action is being taken. The Electricity Networks Strategy Group, made up of Government, regulator Ofgem and industry representatives, has set out a plan for new lines and upgrades that will accommodate the large amount of wind power needed by 2020, along with some new nuclear.

This work is estimated to cost £4.7 billion; additional spending will be required on the connections from land to the offshore wind farms planned.

Ofgem is also working with the owners of the transmission system to bring forward a system of incentives that allow these companies to build grid capacity without having to secure deposits from particular generators, a need which has hindered progress to date. Ofgem has also allowed spending on the consenting and engineering feasibility work for this plan. All this activity shows huge progress, but there is no room for complacency: Government must be vigilant to ensure that the timetable for delivery is kept to.

The arrangements to connect to and manage the grid are also being tackled, primarily through the Transmission Access Review (TAR). The TAR reported in June 2008, with a key recommendation that developers of generation projects should be able to connect to the grid to a timetable matching their project development programme. Work has been ongoing since then to bring forward amendments to the Connection and Use of System Code (CUSC) that will allow this.

While the engagement of all parties has been high, these major changes have been worked up at high speed and there are many vested interests involved. Without a deal being brokered by Government, either this process will get bogged down by legal challenges or Government will have to use powers it took in the Energy Act 2008 to impose new solutions, which will take further time.

For more information please contact Dr Gordon Edge, BWEA Director of Economics & Markets: g.edge@bwea.com

Key Issue: Marine Funding Gap

The development of the UK Wave and Tidal energy industries remains heavily restricted by two distinct gaps in support. These gaps are identified as being pre-Marine Renewable Deployment Fund (MRDF) and post-MRDF.

Briefing

The fact that no technologies have managed to fulfil the entry criteria for the MRDF suggests that either the MRDF criteria are too difficult or there is inadequate support for technologies attempting to fulfil these criteria. It should be noted that industry supports the need for qualifying criteria in order to safeguard the funds from being sterilised by unworthy technologies.

The Technology Programme run by the DTI, BERR and finally the Technology Strategy Board provide this support but stopped two years ago when the Energy Technology Institute (ETI) was created. Companies that have received support from the Technology Programme have achieved pioneering success in technology development and have attracted significantly more private than public investment. However to fulfil the MRDF criteria of three months of operating data in representative sea conditions with a full scale (~1MW) device is being found to require investment in the region of £20-30 million.

The ETI is currently able to provide a high level of investment but it comes as a business deal, not a development grant. The terms of the deal are complex but ultimately they have deterred small, IP-rich companies from even applying. The ETI is expected to support a very few companies, maybe only one or two wave and tidal projects.

Industry consensus is that the MRDF providing one ROCs + capital grant + £100/MWh may be sufficient incentive for projects to develop through the scheme. If the £100/MWh was to be reduced then the capital grant will need to increase. The principle of having a split of capital grant and revenue support is considered to be sound at this stage of development. It is however of great concern that the MRDF is time limited to seven years and many projects would run for 20 years. What happens to a project that looses this support only a short time into its life? Private investors can see that two ROCs on their own will not be enough at this stage and are deterred from investing.

ROC banding (and to a lesser extent the MRDF) was created as a response to the original studies supporting the Carbon Trust’s Future Marine Energy published January 2006. The data behind the report originates in 2005 when the price of steel was closer to about 50% of current levels. Steel prices are still high and expansion of renewable energy will put further pressure on the price. Given the heavy use of steel in wave and tidal energy converters it is therefore likely that the economics behind two ROCs for emerging wave and tidal technologies are currently unsound.

The solution

At pre-MRDF pre-commercial R&D stage there is no substitute for grant funding and the fact is that suitable support no longer exists. Either the Technology Strategy Board (TSB) or the Carbon Trust (CT) are well placed to step up and provide the support for this vital area of development growth.

Government and industry agree that some form of support greater than two ROCs will be needed at this stage of development. Increased revenue support at this stage will pull technologies through the MRDF and is less risk for the public purse. The revenue uplift needs initially to be high but a stepped gradual reduction will be needed to provide a finite amount of public financial commitment. Enhanced capital allowances and further capital grant should not, however, be ruled out for specific issues such as grid, vessels or environmental issues.

For more information please contact Duncan Ayling, BWEA Head of Offshore Renewables: d.ayling@bwea.com

Key Issue: Aviation

In excess of 4500MW worth of renewable wind energy projects in the planning system are subject to objections due to military and civil aviation concerns. This figure does not include a further 3400MW of Round 2 offshore developments in the Greater Wash and unspecified Round 3 developments, which will also in time face aviation objections if no advances are made on resolving the radar issue.

Breifing

In June of last year, Government and Industry took a decisive step in signing a Memorandum of Understanding (MOU), which committed government departments and the aviation and wind industries to work together to tackle the issues around wind farm development and aviation.

The cost of fixing the aviation issue is as yet undefined; but solutions will need to be applied to military air defence radar, military and civil air traffic control radar, and the En Route infrastructure. Once investment has been made into the development of such solutions, there will then be the need to identify who pays for the implementation of enhancements to this national infrastructure, deemed necessary if we are to maintain aviation safety and national security whilst also meeting the UK renewable energy targets. We expect that this will not be a recurring expense – ‘wind turbine resilience’ is likely to become a user requirement for the procurement of new air defence and air traffic control radar.

The wind industry is committed to resolving aviation objections as a barrier to further wind energy deployment, and has demonstrated this commitment by establishing a fund management company to administer and oversee deployment of over £3 million in the next two years into research and development to solve the issue. Further signs of co-operation can be seen in the south of Scotland, where Scottish Government, wind industry and air navigation service providers are working on a regional approach to address a large number of aviation issues.

If the aviation barrier is to be successfully overcome, we need to not only identify solutions, but to resource their development and implementation; a task in which the Government, aviation and wind industries all have a part to play.

The solution

The aviation community has looked to the wind industry to make the first financial commitment to invest in developing solutions, and we have delivered. In March this year, fourteen wind farm developers collectively pledged up to £3.2 million to be invested in radar research and development projects, a significant effort in the current economic climate. Whilst we have made a good start, additional financial contributions will be necessary to progress the Aviation Plan; without this, the MOU aims will be unfulfilled.

The industry needs the Government to take a proactive position in removing this roadblock to wind energy deployment. Support for low carbon technologies is understood to be a priority for the Government; DfT and BERR announced in early April a £20 million investment towards the DfT Low Carbon Vehicle Public Procurement Programme, part of a package which has already committed around £400 million to encourage the development and uptake of ultra-low emission vehicles. Budget announcements later that month further emphasised the Government’s commitment towards building a low carbon economy.

The funds required for removing aviation as a barrier to wind energy, releasing thousands of megawatts today and putting the UK as a world leader on this issue, is an order of magnitude lower than the funds pledged towards developing low carbon vehicles. Limited Government resources therefore need to be appropriately prioritised and channelled to maximise the deployment of renewable energy.

For more information please contact Nicola Vaughan, BWEA Head of Aviation: n.vaughan@bwea.com

Key Issue: Planning

Over 7,600MW of onshore wind energy capacity is stuck in the planning system, which represents 10% of the UK’s installed electricity supply. While 70% of major planning applications are dealt with within the 13 or 16 week deadlines, only 5% of wind farm applications achieve this. The average wind farm planning application takes 24 months to be considered.

Briefing

The Planning Act has introduced an Infrastructure Planning Commission (IPC) to take planning decisions on major infrastructure projects of national significance. Under the provisions of the Act, onshore wind farm applications of over 50MW would come under the IPC. This is a transfer of responsibility from the Secretary of State, who takes these decisions under Section 36 of the Electricity Act, not from local authorities.

Of the 7,600MW of capacity in the system, over half are in Scotland and as such are not covered by the Act. Of the remainder, around 1,000MW are in Northern Ireland and over 3,500MW are below the 50MW threshold and are being decided by local authorities, while a further 625MW worth are at Appeal. This leaves just a few hundred MWs sitting with DECC. Only these applications would be covered by the Act as it stands.

BWEA has supported the Planning Bill as a serious attempt to tackle unnecessary delays in the planning system. However, the current Act only captures a very small proportion of onshore renewable energy projects and would do very little for our industry. In its current form, the Act will do little to prevent this situation from worsening as the majority of future schemes will be either in Scotland or Northern Ireland or below the 50MW threshold for consideration by the IPC. The situation is further complicated by the fact that many local councils simply ignore the existing pro-renewable planning guidance that they get from PPS22.

BWEA does not advocate a change to the 50MW threshold but seeks a commitment from the government to use its powers to refer energy schemes under 50MW if a number of local authority applications are ‘clustered’ and if an onshore application has spent significantly longer than 16 weeks in planning: this would amount to less than 30 applications a year. We also advocate that local councils should stick closer to existing planning guidelines on the decision times, so that there is an even playing field across all generation technologies and infrastructure projects. Projects should be put on an even keel, so that no project is rushed through at the expense of others.

To conclude, there is a vast pool of renewable energy locked in the planning system. When 1.4GW of offshore capacity in planning is added to the above figure of 7.6GW for onshore, there is a total of 9GW that needs to be decided. This is an equivalent of over five million homes that could be powered by wind and 30% of the capacity needed to reach the 2020 target. Getting these projects out of the planning system would also unlock investment, create jobs and enable companies to free up staffing and financial resources.

The solution

Ensure consistency across planning regimes, and clarity of policy hierarchy. Pre-eminence needs to be given to National Policy Statements in the preparation of development plan documents and in advance of updating existing development plans at the regional and local level.

BWEA also believes that the Government should carefully consider its position on issues such as business rates for wind farms, so as to not to discourage further investment.

For more information please contact Jan Matthiesen, BWEA Head of Onshore: j.matthiesen@bwea.com

Key Issue: Feed-in Tarriff

Realising the full potential of the UK micro and small wind industry will critically depend on how the UK government structures the forthcoming
Feed-in Tariff incentives for small-scale renewable electricity generation.

Briefing

A global report (AWEA Small Wind Turbine Global Market Study) published in April examined the international small wind market in unprecedented detail. The results revealed global markets for the deployment of small wind turbines were beginning to show evidence of their long-expected potential.

Between 2007 and 2008, the world’s small wind market grew by 53%, with approximately 30MW installed across a number of leading markets. Much of the recent growth has been stimulated through national governments implementing fiscal and financial incentives specifically aimed at encouraging appropriate use of wind technology in the sub 50kW category.

This summer the UK Government consulted on the provision of financial incentives for small scale renewable electricity generators, for implementation by April 2010. The consultation’s content has been watched avidly by a UK small wind sector which has long been seeking a support mechanism to match its world class manufacturing industry.

The UK small wind market is currently the second biggest in the world (behind only the US) and of this sector, UK manufacturers currently hold an 82% revenue share. Beyond home markets, UK small wind manufacturing companies currently export 50% of their output to over 100 countries and April’s report showed the UK to be the No.1 exporter of small wind turbines in the world.
In 2008 no other national industry exported more installed capacity (4.7MW) of small wind than UK businesses.

The summer’s consultation on small wind incentives gives the UK Government the opportunity to learn from lessons past and deliver for small wind where it failed to deliver for large wind. There are now no large wind manufacturers because the UK government did not support the indigenous market/industry at an early stage in the technology’s development. Germany, Spain, Denmark, and other countries that did provide early support are now reaping the rewards – supplying significant global demand.

BWEA has been working with industry to formulate the right policy structure to take the small wind industry forward. The conclusions call for support to be given to generation rather than export, for rates to be set initially high so to stimulate demand, for the policy to encourage appropriate sitting through the deployment of the most carbon effective and cost effective technology at each small scale site.

If the appropriate incentives are provided to commercialise small wind in the UK the environmental, economic and job benefits could be substantial. Although 500 UK based jobs were created in 2008 alone, tens of thousands could be generated by a blossoming industry in a future where UK companies continue to supply not just the windy British Isles but a fast expanding global market for decades to come.

The solution

Drive commercialisation and product cost reduction through stimulating widespread technology uptake within grid connected markets. BWEA recommends equivalent tariff rates of at least £0.36 per kWh for small wind products of up to 10kW.

For more information please contact Alex Murley, BWEA Small Systems Manager: a.murley@bwea.com