Your independent energy adviser
0800 051 5770

Renewable and Green Energy In the News

Renewable and green energy just can’t be kept out of the news at the moment.

Whether it’s bold new sources, government subsidies, confused customers or cost concerns, renewable energy is a constant feature of the headlines.

To underline its growing importance, the Office of National Statistics has reported that the influence of renewable energy on the nation’s fuel mix has increased by 43% over the last 12 months to now contribute 18TWH or in other words over a fifth of all electricity production.

Will Straw, Associate Director of the left leaning Institute for Public Policy Research (IPPR), welcomed the figures in saying:

“These impressive figures show that renewable energy can play a major role in Britain’s energy mix.

“Onshore and offshore wind in particular has been squeezing coal and gas off the grid which will help reduce Britain’s carbon pollution.”

However, some of the increase needs to be attributed to an exceptionally windy year as much as to any new renewable generation plant coming on supply or a refreshed appetite from consumers.

Dr Robert Gross, the Director of the Centre for Energy and Technology at Imperial College London noted that:

“Even if the latest figures were helped by the mild, wet and windy weather, such a high level of renewable energy would have seemed almost inconceivable a decade ago. Renewable energy is now on a par with nuclear in terms of its importance as a power generator”

But given the subsidy for renewable energy is a direct cost on energy bills, significant investment is being made by the business energy market to deliver these changes. And often they know nothing about it.

This isn’t a no cost gain in the same way as climate change is not a no cost impact.

Currently the Renewables Obligation, charged to all business energy customers, makes up around 4% of the average bill and the cost of this Obligation has increased by a staggering 60% since 2012.

A spokesman for the Department of Energy and Climate Change (DECC) said:

“As we move closer to achieving the government’s renewables target it is inevitable we will start using more expensive forms of renewable energy such as offshore wind, which can be deployed at far greater scale than other renewable technologies. By supporting these technologies now we are driving down their costs.

“Nonetheless the support levels for each technology are coming down over time and our analysis suggests electricity bills will be on average £41 lower per year between 2014-30 compared to meeting the our targets using current measures.”

But the National Audit Office (NAO) has warned that not only is the level of funding high, it is being compounded by errors in the subsidy bidding process with an additional 2% expected to be added on to energy bills for the lifetime of the latest subsidised deals that have been agreed.

And the subsidies are needed.

Latest figures show that the average cost for each unit of green electricity has increased more than 20% in 12 months, hitting a record high of £66.97 per MWH in 2012/13, compared to £54.26 the year previously.

This increase has been largely attributed to the rise in offshore wind turbine development that receives double the subsidy of the less popular onshore wind farms.

In total £2.5bn of subsidy was handed out for renewable energy in 2012/13 compared to £1.65bn in 2011/12. £1.5bn of which went to energy companies undertaking large-scale renewable projects and £0.5bn to households with solar panels and other small-scale generation

Yet still the intermittency debate on the availability of wind energy has not been settled; indeed Q2 2014 is expected to see a downturn in the contribution of renewables as the weather patterns reverts to more normal wind levels.

Dr John Constable, Director of the Renewable Energy Foundation said:

“DECC is subsidising renewables to meet arbitrary and over-ambitious EU targets, so it was inevitable that we would move rapidly up the cost curve once the ‘cheaper’ opportunities had either been fully developed like landfill gas or exceeded the limits of public acceptability like onshore wind.

“Subsidy costs are now spiralling out of control – the annual burn is about £3bn a year and rising fast. There still is a good case for experimenting with renewables, but building so much capacity when the whole sector is still fundamentally uneconomic is bound to end in tears.”

Adding to the concerns, the NAO found that DECC had awarded nearly £17bn of renewable energy contracts despite having failed to run a competitive tendering process.

The NAO believe that this may mean that the government have been over-generous with the subsidies offered and may be paying the recipients too much to build the latest generation of renewable power plant.

In total, DECC have spent 58% of the total budget available to them between 2014 and 2021 on just 8 projects, in 2014 alone!

Amyas Morse, head of the audit office said:

“The investments should contribute to the UK’s achieving its energy target in 2020, but it is not clear that awarding fewer early contracts would have put the achievement of that target at risk.

“As the contracts-for-difference regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the department’s opportunity to secure better value for money”

The beneficiaries of this apparent largesse were not without controversy either, with the government awarding the funds to offshore wind and biomass projects whilst ignoring the cheaper onshore wind, apparently under pressure form the anti wind lobby. The process was even subject to threatened legal action where Drax, Europe’s largest coal fired power station missed out on an expected subsidy to transform its plant into the leading biomass plant.

More controversy abounded with Dong, the Danish energy firm, attracting the most subsidies at the expense of UK businesses

And as a final cause for concern, even at their optimum operating level the 58% of monies apportioned to these deals would deliver projects that are able to provide just 25% of the 2020 target. And even then the winning bidders could reduce the capacity of their generation offered by 36% and not face any financial penalties in doing so. In effect this means that it is entirely possible for just 3% of the 20% target to be met at a cost of 58% of the monies available.

DECC countered that speed was of the essence due to chronic under investment in the UK saying:

“These early contracts are designed to offer better value to bill payers than the previous system and have reassured those we need to invest in our energy security. Without that investment, projects would have been unable to go ahead or been significantly delayed, putting our future energy security at risk.”

Whilst question marks abound over the government’s focus and decision-making, there is equal consternation within Ofgem as to how transparent the green and renewable tariffs offered by energy suppliers really are.

Ofgem reported that:

  • Customers remain disengaged from the green energy market
  • There is low awareness and consideration of green tariffs
  • Green tariffs are perceived to attract high prices
  • There is little understanding of tariffs & the wider green ‘agenda’
  • There is low awareness of the Renewables Obligation and the cost it brings to all energy customers
  • There is a mis-assumption that purchasing a green tariff will result in renewable energy being supplied to the premise
  • There is a lack of distinction between green tariff types

As a result Ofgem has committed to bring about improvements in the labelling, descriptions and marketing of green tariffs in order to benefit customer decision-making.

Although Ofgem launched the Green Supply Guidelines in 2009, these have failed to address the issues of suppliers offering uncertified green products of uncertain provenance.

Crucially, going forward, Ofgem, subject to a consultation, want suppliers to be obligated to “inform their customers and provide evidence of whether or not there will be environmental benefits from a particular tariff”.

Ofgem are proposing this will take a number forms:

  1. Transparency – Suppliers will need to clearly state if a green tariff does not offer any environmental benefit other than those that consumers already pay for through costs embedded in their energy bill or through taxation.
  2. Environmental benefits – Suppliers will need to show that environmental benefits happen because consumers chose a tariff and not solely due to subsidies or supplier obligations.
  3. Evidence of supply – Suppliers will need to provide evidence that verifies where the electricity supplied in a tariff comes from. This means that they must show they have enough Renewable Energy Guarantees of Origin certificates (REGOs) to offer the product

In addition suppliers will be required to publish an annual report on how they are providing environmental benefits through adoption of the tariff or being clear to customers if it doesn’t.

The necessity for a much tighter rein on suppliers is expected to become more and more crucial as the expansion of renewable energy continues.

With Q1 2014 seeing a 43% rise in renewable generation it is clear that the potential is there, when the environment is right, for renewable energy to play a core role in the UK energy market.

This rise of renewable energy has been given a further boost by a UK based breakthrough in the production of solar cells that are expected to render the next generation of solar panel tech cheaper, more efficient and safer.

Those solar panels currently in use are mostly based on photovoltaic cells (PV) composed of silicon semiconductors, which convert sunlight directly into electricity.

However, rather surprisingly given its use, silicon is not good at absorbing sunlight. As a result the ‘next gen’ of PV cells will have a thin coating of cadmium telluride, which in total contrast to silicon is such a good absorbent that it only needs to be about one hundredth of the thickness of silicon to deliver the same performance.

The drawback to this application however is that cadmium telluride becomes potentially dangerous once it is “activated” with cadmium chloride, that is the process by which the efficiency of converting the sunlight absorbed into electricity is increased 2% to 15%+.

But scientists at Liverpool University have discovered that magnesium chloride; a salt found in seawater can be used instead of cadmium chloride with the same efficiency and effectiveness but none of the potential dangers.

Jon Major of the University of Liverpool said:

“We certainly believe it’s going to make a big change to the costs of these devices. The cost of solar is going to match fossil fuels eventually but this is going to get us there quicker.

“Magnesium chloride is incredibly low-cost and it’s simply recovered from seawater. It’s used to de-ice roads in winter and it’s completely harmless and non-toxic. We’ve managed to replace a highly expensive, toxic material with one that’s completely benign and low cost”

“We have to apply cadmium chloride in a fume cupboard in the lab, but we created solar cells using the new method on a bench with a spray gun bought from a model shop,” Dr Major said.

“Cadmium chloride is toxic and expensive, and we no longer need to use it. Replacing it with a naturally occurring substance could save the industry a vast amount of money and reduce the overall cost for generating power from solar,” he said.

Although magnesium chloride is around 1% of the cost of cadmium chloride, the upfront cost is not the only financial benefit it can bring, the disposal of spent solar panels will be easier and cheaper when not having to deal with toxic waste issues.

The time therefore could be on the horizon, for small-scale generation at least, for subsidies to be phased out and PV renewable energy to be an economically viable option for a much wider customer catchment.

Whilst the status quo remains, customers will be agnostic to the actual source of the energy and focussed fully on price.

With the advent of these changes, the removal of the need for subsidy, and the end of poor centralised decision-making, the potential is there for renewable and green energy to be placed on a genuinely comparative level to fossil fuel energy, at which point customer appetite for renewable sources will be finally stimulated for all the right reasons.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.