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New research published today by the Carbon Trust shows that the retirement of coal and nuclear generation capacity will open up a gap of at least 14GW between supply and demand by 2015 – equivalent to almost a fifth of the UK’s capacity requirement.
Renewable energy could be significant in making up this balance but is being failed by the current policy approach. The Carbon Trust estimates that under the current framework of the Renewables Obligation, renewables will only meet 10 per cent of the UK’s electricity needs by 2020, half the Government’s aspiration of 20 per cent by 2020. Not only are targets being missed, but the cost of installed renewable energy is higher than necessary.
Based on this research, the Carbon Trust believes that the Renewables Obligation (RO) should be reformed or replaced. It outlines a number of options in its report - “Policy Frameworks for Renewables” - and suggests that with changes, renewables can meet up to 13 per cent of the UK’s electricity needs by 2015 and 19 per cent by 2020 – nearly double current projections if the status quo is maintained.
Of the carbon-free energy options available in the UK that can be deployed at scale by 2015, the Carbon Trust believes that beyond the continued development of onshore wind, offshore wind offers significant potential to help fill the emerging capacity gap.
The full potential of renewables will only be achieved through a policy framework that supports several different renewable technologies at the same time. The RO in its current form cannot achieve this. The Carbon Trust believes that a switch to a Renewable Development Premium would deliver the most renewable electricity at the lowest cost. This would offer a fixed tariff on top of the wholesale electricity price to each technology depending on their level of commercialisation, which would be reduced over time as the technology matures and costs decline.
Tom Delay, Chief Executive of the Carbon Trust, said: “Renewables, starting with on and offshore wind, can make a material contribution to meeting our energy needs. Renewable energy needs a better support framework in place to bring down costs and fast track its development.
“Our report highlights that the current RO is not working as efficiently as it should and to maximise the delivery of renewables, urgent change is needed. If we get the right framework in place we can reap the benefits of reduced carbon emissions and strengthened energy security, as well as develop leadership in low carbon technologies. Switching to the Renewables Development Premium as a part of the ongoing Energy Review would ensure that renewables play as full a role as possible in the UK’s low carbon economy.”
The Carbon Trust’s analysis also looks at developing renewable technologies in the longer term, recommending that the UK should focus on low carbon technologies where it has a natural lead and is likely to achieve economic benefits, such as marine. The report suggests that if the UK gives wave the support it requires, it could develop an export industry worth up to £4 billion per annum by 2050. The Carbon Trust believes that a ‘pull through’ revenue mechanism, such as the Renewables Development Premium, would be best suited to support early stage low carbon technologies including marine.
Policy Framework for Renewables
Policy Framework for Renewables - Executive Summary
(July 2006)
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