Heat Still Matters: Where does Heat Policy need to go?

Transcription

1 Heat Still Matters: Where does Heat Policy need to go? Chris Miles Senior Policy Advisor, Heat, REA GROWING THE RENEWABLE ENERGY ECONOMY

2 Who we are The REA was established in 2001 as a not-for-profit trade association, representing British renewable energy producers and promoting the use of renewable energy in the UK. The REA helps its members build commercially and environmentally sustainable businesses whilst increasing the contribution of renewable energy to the UK s electricity, heat, transport and green gas needs. Corporate membership of the REA consists of around 750 companies ranging from sole traders, farmers, installers, energy suppliers, service providers, major multinationals, project developers, manufacturers, organics recyclers and composters.

3 Who we are Sector groups Subsidiaries The Wood Heat Association is the UK s largest renewable heat trade body. Our various sector groups enable us to focus on sector-specific issues. Members can join our various groups concentrating on individual renewable technologies, energy market sectors, or application areas. Renewable Energy Assurance Ltd carries out a range of certification and consumer protection activities all of which promote sustainable energy.

4 Government: Low Carbon Heat Vision Heat is 32bn/year business & represents 44% of energy consumption From 2009 onward the outlook for Low Carbon Heating looked positive: RHI Announced in July 2009; launched for non-domestic in Dec 2011 & (eventually) for domestic in March m secured through to March 2016 All Party aspiration of 12% of heat from renewable sources by 2020 In March 2013 DECC published The Future of heating o a positive plan of actions for sustainable heating. o Heat Networks: 12 policies identified o Aspiration of 14% from heat networks by 2030 (2% in 2012) o Heat Network Delivery Unit set up o Heating & Cooling in Buildings: 15 policies identified o A long list of next steps

5 Status UK Renewable Heat & Cooling (2014) 4.8% in 2014 CAGR (2010 to Renewable Heat Sources TWh Proportion 2014) Domestic wood % 5.4% Industrial wood % 15.5% Other bioenergy % 7.8% Deep geothermal 0.0 0% 0.0% Heat Pumps 1.2 4% 36.9% Solar thermal 0.6 2% 7.5% Total % 8.1% Source: DECC Dukes Data July 2015 * 2015 assumes same CAGR 2010 to 2014

6 Heating Oil Price is impacting growth

7 Status: Non-Domestic RHI RHI Heat delivered in 12m to Aug 15 has grown 130% compared to 12m to Aug 14 95% of capacity and nearly 90% of heat generated is biomass heat Small biomass has now degressed below medium biomass 10% of Heat (GWh) from biomethane injection Other technologies still struggling despite tariff increases in 2014 Tariff Band 1 Full 2 applications Capacity of full applications Number % of total MW % of total Small Solid Biomass Boiler (< 200 kw) 7 12,227 87% 1, % Medium Solid Biomass Boiler ( kw) 897 6% % Large Solid Biomass Boiler (> 1000 kw) 37 0% % Small Solar Thermal (< 200 kw) 262 2% 4.0 0% Small Water or Ground Source Heat Pumps (< 100 kw) 400 3% % Large Water or Ground Source Heat Pumps (>100 kw) 86 1% % Biomethane % - - Biogas 67 0% % Air Source Heat Pumps 77 1% 2.3 0% CHP 1 0% 1.2 0% Deep Geothermal 0 0% 0.0 0% Total 4 14, % 2, % Source: DECC RHI data Sept 2015 & DECC Dukes Data July 2015 * 2015 assumes growth rate of yr to Aug 2015 v. yr to Aug 2014 (may not be true)

8 Domestic RHI: Status Total (New & legacy installations) to end August 2015 Tariff Band Applications Average capacity Number % of total kw MW % of total Air source heat pump 19,778 44% % Ground source heat pump 6,466 14% % Biomass systems 10,714 24% % Solar thermal 7,685 17% % Total 44, % % Solar thermal capacity not in DECC numbers; estimated from 4m2 x 0.7kW/m2 (MIS typical examples) Total Capacity installed Biomass growth slowed by degression & oil price Slow but steady roll-out heat pumps 2Q14 3Q 14 4Q 14 1Q 15 2Q15 3Q15

9 How much will Gov. policy impact growth?

10 Let s reflect on the Government drivers: What the Government Says.. Deliver lowest cost carbon reductions through to Jobs in green technologies Energy Security Diversity mitigates price and supply risk UK supply (balance of payments) Ensure that energy is affordable in short, medium & long term Delivering cost effective trajectory to meet 2020 Renewable Energy targets But there is a huge battle between the Climate Change mainstream and the short term austerity drive. there have been many negative surprises since the election..

11 What do we need to do? Renewable Heat Confirm RHI budget & refine design for biomass heat & biomethane injection to ensure improved cost effectiveness Major review for heat pumps how to increase roll-out and cost effectiveness Heat Networks Heat Networks Policy Needs holistic framework from 2016 onwards Regulation Still need building regulations review (2016) Energy Performance in Buildings - Zero Carbon Homes/ Buildings, - EPC ratings

12 RHI: Continue biomass heat growth Confirm improved RHI budget to 2020 to deliver Renewable Heat targets and carbon targets at lowest cost to UK tax payer Maintain momentum & improve cost effectiveness of the RHI: Combine small and medium biomass budgets and tariffs (at the medium biomass rate) Reassess current budget allocation to maximise likelihood of delivering RE target Ensure large biomass tariff does not degress to 2020 as it is most cost effective technology/size. Include this as a floor price for all RH technologies. Do not degress Tier 2 tariff (small/medium biomass) below that for large biomass. Improve certainty for projects with longer lead times through RHI rate guarantees at financial close Review domestic biomass tariff as last degression has been excessive and likely to stop rollout Address outstanding uncertainties around biomass suppliers list and ensure nonwood feedstocks can benefit from similar arrangements

13 RHI: Accelerate other technologies Confirm RHI budget to 2020 Consider other mechanisms for low roll-out technologies without increasing their cost. For heat pumps, examples may include: Standardising process of gaining planning consents Improving consents process for water source heat pumps (in progress between DECC, EA, CIBSE, GSHPA) Consider introducing financing for domestic RHI to enable the RHI to be capitalised Needs strong consumer protection & guidance from FCA in terms of how installers may point to finance providers without recommending them. Include domestic RHI for new build until building regulations are sufficiently stringent to drive significant deployment Streamline heat pump design & compliance process (MCS)

14 Legislative Measures for Heat Zero Carbon Homes and Buildings Ensure that allowable solutions drives low carbon solutions work with Green Building Council and others Continue to push for tighter definition of zero carbon homes & buildings. Building Regulations Ensure Building Regulations review delivers appropriate support for onsite Renewables Energy Act 2011 Ensure requirement for landlords of domestic and non-domestic properties are required to have EPC ratings E or above by 2018/19 Heat Networks Develop policy strategy and options for heat networks via inclusive stakeholder process working with other Trade Associations. to include heating, cooling and community ground loops for heat pumps Business Rates Review Ensure they promote or at least do not disadvantage renewables

15 Summary Confirm budget AND optimise RHI to deliver 12% of heat from Renewables with greater diversity & improved cost effectiveness. Cost effectiveness is critical Needs to work for all technologies not just biomass & biomethane injection The RHI is starting to make a meaningful impact & costs for biomass are reducing rapidly Continued development of other non-subsidy measures including potentially carbon tax or equivalent to build sustainable long term growth from 2020 onwards. There needs to be sustained pressure on government to move back towards regulation and/or selected carbon taxation. We need to work with Government and the Opposition to reverse some of their recent decisions.