How achievable are the UK s 2020 renewable energy targets?

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1 How achievable are the UK s 2020 renewable energy targets? Gareth Redmond Office for Renewable Energy Deployment What is the target? A legally binding, EU target to deliver 15% of the UK s energy needs from renewable energy sources. There are three elements to delivery of the target: Electricity where we need to deliver over 30% of our electricity needs from renewables; Heat around 12% of our total heat demand in 2020 would have to come from renewables Transport around 10% of energy used in transport in 2020 would have to come from renewables. 2 1

2 Scale of the challenge Percentage energy demand from renewables Baseline and Target Renewable Energy Use for Average and Selected EU Member States 2005 Baseline 2020 TARGET (% RES consumption) The UK must secure a factor of ten increase in renewable energy over the period, compared with an average factor of two increase across Europe all while increasing demand means additional deployment is needed just to stand still 3 Sources: ORED (2013) Strong Government commitment Long term framework for decarbonisation 80% reduction in emissions by 2050, carbon budgets to get us there. Energy Act(Electricity Market Reform) introduced to Parliament November 2012 Royal Assent at the end of last year. Secure funding framework a threefold increase to 7.6bn by I am determined to see the UK retain its global lead in this sector and we have set out the framework to achieve that. Ed Davey, November 2013 Since 2010 DECC has recorded 31.4bn of private sector investment in renewable electricity, with the potential to support over 35,000 jobs across the UK. 4 2

3 Technologies critical to achieving the target 1. Offshore Wind 2. Biomass Heat 3. Biomass Electricity 4. Onshore Wind Very large deployment potential but deeper / further out sites are expensive. Working to reduce cost by 2020 Heat from wood, waste, sewage etc. mainly for industrial and commercial use. Significant contributor of renewable electricity now, with potential for further conversions Cheapest big technology and can be widely deployed, but important issues with their placement and public desirability 5. Heatpumps 6. Solar PV 7. Marine Energy 8. Renewable Transport Uses electricity to pull heat from air or ground ( reverse refrigerator ). TWh is for industrial/ commercial potential (the biggest sectors) Panels to generate electricity from sunlight. Can be deployed from small (domestic) up to industrial scale Very small contribution in 2020, but potential to provide much more in future. UK a leader we support its innovation Much theoretical potential but worries about sustainability Electricity Heat Transport 5 Sources: Definition from EU, Directive 2009/28/EC; TWh figures from DECC(2011 and 2012), Renewables Roadmap Electricity 3

4 Huge challenges Fifth of plant closing by 2020 Weak signals in the market for low carbon generation Long run electricity demand could double Current market suits gas, but harder to build low carbon plant 7 Key policy tools - electricity Renewables Obligation (RO) Currently main policy for supporting large scale renewable deployment. Subsidy varies by technology, provides 20yrs support. Closes to new generation in 2017 (by which projected to support 79TWh). Lifetime spend may total ~ 43 billion 2013/14 to 2036/37 (discounted, 11/12 prices) Contracts for Difference (CfDs) Intended to reduce risk for low carbon investment, including renewables. It will take over as our main source of support for largescale electricity generation projects. Between the introduction of CfDs from 2014 and the RO closing in 2017, new renewable projects will be able to make a one off choice between the two mechanisms Feed in tariffs (FITs) scheme Supports small scale deployment (e.g. solar PV on roofs) via a tariff per kwh generated. Over 400,000 installations by January 2013, which could grow to 1 million by 2015 at the cost of an additional 450m. We recently reduced levels of subsidy for new installations, bringing significant cost savings. 8 4

5 Contracts for difference Current Renewables Obligation Renewable generators have their income topped up by a (fairly) constant amount per MWh, by way of a purchaser obligation. Different technologies get different levels of top up. Typical duration 20 years. Generators take the risk of forward price exposure. This will close to new projects in 2017 but scheme will continue for already built projects. For new low carbon projects Everyone still sells power in the open market. Income for new low carbon generation topped up from reference market price to a fixed strike price removing price exposure. This top up lasts 15 years for most renewable technologies. Net costs are paid by consumers via their electricity suppliers (as with current system) but energy intensive users may be exempt. 9 Regen-SW Providing certainty for investors Making it happen: CfD Removes Long term Price Risk from Investors Securing investment & deployment Getting investment decisions we need Opening up supply chains Earlier allocation of CfDs, reducing risk to developers Lowering the cost of investing in low carbon Generation Support payments backed by a contract, and a robust payment scheme Cost reduction & removing barriers Strong progress need to go further and faster aiming for grid parity Working with industry to solve problems that prevent or delay deployment. Clear set of roles & responsibility between Government, Delivery Body and Developer Community benefits and engagement Sustainable deployment Communities seeing the benefits of energy projects in their areas 10 5

6 Heat Renewable Heat Incentive Key policy tools heat Launched in 2011, the RHI for non domestic properties provides financial incentives to install renewable heating in place of fossil fuels and the Renewable Heat Premium Payment (RHPP) scheme provides grants to help install renewable heat technologies in domestic properties. Details of domestic RHI announced in July 2013, with scheme intended to be open for payments in Spring 2014 Schemes can be used in conjunction with Green Deal energy efficiency scheme Financial incentives for renewable heat Provides subsidy, payable for 20 years, to eligible, non domestic renewable heat generators based in GB. Includes industrial, commercial, public sector and not for profit organisations Also available to producers of biomethane. This includes businesses, hospitals and schools, as well as district heating schemes (eg one boiler serves multiple homes) All applications are subject to the detailed scheme rules. Ofgem administer the scheme. 12 6

7 RHI objectives Policy Objectives Deliver renewable heat as a significant contribution to the Renewable Energy Directive Meet Government s carbon reduction targets through mass deployment of renewable technologies (2011 Carbon Plan) Contribute to growth agenda expect to support 750,000 domestic renewable heating systems by 2020/21 Industry Objectives Develop supply chains through growth in renewable heat deployment Drive performance improvements through increased uptake and mainstream adoption of renewable heat technology Additional Objectives Minimise barriers to uptake (including public attitudes) Ensure innovation, performance and cost improvements Review impacts on other policy areas such as fuel poverty house building and energy efficiency 13 Transport 7

8 Transport Renewable Transport Fuel Obligation Currently our primary mechanism for meeting the transport target the majority of the renewable energy in transport is expected to come from biofuel Came into effect in April 2008 with an obligation level of 2.5%; for 2013/14, the level is 4.75%. Concerns about sustainability of some biofuels in terms of indirect land use change have meant that levels have not yet been set to rise beyond 2013/14. Biofuels play a core role in efforts to tackle climate change, however particularly where there is no viable alternative, such as for aviation and for heavy goods vehicles. Work on indirect land use change and therefore the sustainability issue with biofuels is currently being tackled at an EU level. 15 Progress 8

9 PROGRESS: Electricity A change in scale Renewable generation up 56% to record 15.5% of supply in just 12 months. (Latest quarter shows 13.2%.) 17 PROGRESS: Electricity Installed capacity (MW) A 450% growth in capacity between 2003 and 2013 (Q3) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Electrical Generating Capacity from Renewable Sources, 2003 to 2013 Q ,011 9,215 12,264 19,091 N.B. for the purpose of comparison, 10MW is roughly equal to five or so onshore wind turbines, or about two offshore turbines 15, Matched by a strong forward pipeline (MW) Under Construction Biomass (dedicated) Offshore Wind Onshore Wind Awaiting Construction Sample of recent major announcements Pre Consent 324 3, ,191 2,734 11,787 1,291 5,254 6,371 London Array was opened by the PM in July and is the world s largest operational offshore windfarm (630MW). Greater Gabbard was opened by Michael Fallon in August and is the world s second largest offshore windfarm. The Drax biomass conversion was opened by Ed Davey in December. Drax plan to convert two additional units and it is on track to become Europe s largest generator of low carbon electricity. 18 Source: Capacity from DECC(2012), Digest of UK Energy Statistics, updated via quarterly releases. Pipeline data from REPD (September2013). Investment figures from developer announcements. 9

10 PROGRESS: Electricity Technology 2013 Q2 TWh % change on previousyear 2013 Q3 TWh % change on previous year Onshore wind Offshore wind Hydro Solar PV, wave and tidal Bioenergy (inc. cofiring) All renewables Renewables' share of total electricity is increasing: in Q2, 2013, it was a record 15.4%; in Q3 2013, it was 13.2%. Strong public support: Threequarters of people (76%) continue to support the use of renewable energy sources to generate the UK s electricity, fuel and heat UK investment in renewable energy has been far more resilient than the rest of Europe and other parts of the world global where there has been a marked decline since PROGRESS: Heat As of 30 November: 2,804 accreditations to the scheme, with 577 MW of installed capacity. 555 GWh of heat generated for the installations that have receive payments. By end August 2013, just under 19m in tariff payments made we estimate payments in 2012/13 will have totalled 27m once all the applications have been accredited Heat generated and paid for under RHI scheme (GWh) Large biomass 104 Small biomass 167 Other 32 Medium biomass Number of full applications Number of accreditations Applications per month

11 PROGRESS: Transport In 2011 the UK introduced mandatory sustainability criteria into the renewable transport fuel obligation. These changes meant that biofuels could no longer be sourced from areas of high biodiversity, such as rainforests or wetlands also saw the introduction of double rewards for advanced biofuels and biofuels made from wastes. These changes have helped lead to encouraging trends in the fuels supplied under the RTFO. The average carbon savings of biofuel supplied under the RTFO, when compared to fossil fuel, have increased from 46% in 2008 to around 66% in 2012/13 (excludes ILUC). 21 So how achievable? We are fully committed to achieving this target and have seen a significant amount of deployment to date, particularly in the renewable electricity sector. This was demonstrated in 2012 when more than 4% of the UK s energy came from renewable sources above our interim target. Renewable Energy Roadmap, 2013 update The overall target is achievable, albeit with some significant outstanding challenges and a lot of complex work still needed to deliver. But we have a few more years yet! 22 11

12 My contact details: Gareth Redmond Head of Renewables Programme Team Office for Renewable Energy Deployment DECC 3 Whitehall Place London SW1A 2AW Gareth.Redmond@decc.gsi.gov.uk 12