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UK Renewables picture improving despite closure of FiTs

Issues affecting electricity generators and the energy market as a whole.

7th June 2016

UK leading the world in offshore wind energy capacity and investment - But can we put new renewables capacity to work to improve energy security and reduce domestic power prices?

Despite the Government’s decision to pull the plug on renewables subsidies last autumn the UK renewables scene looks to be in good health. According to a new report by Renewable Energy Policy Network for the Twenty First Century (REN21), the UK saw £15.4 billion of new investment in new renewables capacity in 2015, with nearly half of that spend (£7.3 billion) going towards building new wind capacity in 2015. A total of 1GW of wind capacity was built, some 25% up on 2014, making the UK the 4th heaviest wind investor in 2015 after only China, the US, and Japan. This extra capacity pushes our total wind capacity to 13.6GW, placing us up into 9th place globally.

If you like ranking tables you will be even more impressed with our positioning in the offshore wind league table where we were placed 2nd for creating new offshore wind capacity in 2015, by bringing 571MW new capacity on line. The UK is still the largest offshore wind energy generator in the world with 5.1GW at our disposal. It gets better: Danish Dong Energy, the UK’s largest offshore wind power operator, has already invested some £6 billion in building new offshore wind capacity for the UK and expects to double that figure by 2020.

Meanwhile, influential energy blogger Chris Goodall published new analysis which suggested renewables' share of the UK power mix rose 31% last year, so that renewables produced 18.2 per cent of all UK electricity during 2015, up from 13.9% in 2014. Wind and solar generation hit a record 40% for a few hours last June and even overtook coal generation during the windy month of December, he added.

The figures were nearly as impressive for solar investment. We created 3.7GW of new solar photovoltaic capacity in 2015, making us the 4th largest investor in this technology in the world last year. Total solar capacity rose 9.1GW by year end, again placing us in 9th place.

We also grew our bio-power capacity by 12%, admittedly led by the partial conversion of Drax coal power station to biomass which completed in the last few months. Indeed the UK saw the largest growth in biogas in Europe, no doubt stimulated by the still-intact Feed-in-Tariff (FiT) subsidy; although we now read that the Government plans to scrap the FiT for larger anaerobic digestion installations from January 2017.

In 2015 also, from an investment point of view at least, we had a tipping point globally in that completed new renewables installations added 60% of total new capacity brought online over 12 months so a total of 147GW of new green energy capacity became available around the globe. Such has been the surge to go green all over the world that by the end of this year REN21 expects that up to 29% of the world’s generating capacity will be from renewable sources.

There is good news for offshore oil & gas workers being laid off in their droves over the last 12 months or so also, as many of their skills are highly transferrable into the construction and maintenance of offshore wind farms. By the end of this decade the UK’s offshore wind sector will double in size, and there are opportunities in construction and operation of a growing number of sites.

New offshore projects in development are exponentially larger than existing wind farms in terms of size and scale. These power plants will need huge numbers of highly skilled individuals to get them built. Offshore wind farms have long development programmes, a construction phase of 2-3 years, and an operating lifetime of 20-25 years. For example, Scottish Power Renewables is currently developing its East Anglia One offshore wind farm; a £2.5 billion investment requiring an estimated 3,000 skilled employees.

However, the International Energy Agency (IEA) sounded a warning bell this week in its latest report entitled Measuring the value of next generation wind and solar, by saying that the rapid growth of wind and solar power in some countries is bringing “new challenges to the fore”, with the issue of system and market integration becoming “a critical priority for renewables policy and energy policy more broadly”.

Successfully integrating wind and solar into the broader energy system requires action in three main areas, a new IEA report argued:
1. System friendly deployment, so that the net benefits of wind and solar power are maximised for the whole system;
2. Improved operating strategies, including “advanced renewable energy forecasting and enhanced scheduling of power plants”; and
3. Investment in flexible resources including demand-side response, storage and grid infrastructure.

In order to encourage system friendly deployment it said there needed to be a “paradigm shift” in the way wind and solar is assessed economically. It said the “traditional focus” on the levelised cost of energy “is no longer sufficient”, as the measure is “blind to the when, where and how of power generation”.
Instead, it argued, they should be judged by their system value: “the overall benefit arising from the addition of a wind or solar power generation source to the power system.”

Among the items in the plus column are lower fuel and emissions costs; reduced requirements for other generation capacity and sometimes lower transmission losses. Items in the minus column include
• Increased wear and tear on conventional plants as they are forced to vary their output more in the light of renewables capacity moving up and down;
• Reduced utilisation of non-wind and solar assets and the need to curtail wind and solar when their output is too high.

Changes to grid infrastructure requirements can fall into either column, depending on the particular case. Accordingly, it said existing policy and market frameworks should be upgraded to encourage the building of projects that bring the highest system value compared with their levelised cost of energy.
Share of wind and solar generation in selected countries for 2014 and 2020
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Source: IEA
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The report also said modern wind and solar plants can “actively support their own integration by providing valuable system services”. It recommended that “forward-looking technical standards” are established to ensure that new power plants are capable of providing “state-of-the-art support for a stable and secure operation of the power system” and that electricity markets and operating protocols are reformed to allow for the provision of system services by wind and solar assets.

Additionally, it said institutional and regulatory structures of low- and medium-voltage grids be reviewed and revised, to reflect their new role in a smarter, more decentralised electricity system, and said electricity tariffs should be reformed to accurately reflect the cost of power depending on time and location.
So building new renewable capacity is clearly only half the battle. We also have to work out how to manage this supply and price it correctly. Only then will we be sure we can use this additional capacity to not only meet our green energy targets, but also help us improve UK energy security, while delivering affordable power into UK homes.

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