DECC UK Renewable Energy Roadmap Update - January 2013

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23 January 2013, Nuclear, Solar, Wind

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According to the Department of Energy and Climate Change (DECC) the UK is on target to meet 15% of total energy consumption through renewable sources by 2020. Over the period from July 2011 to the end of June 2012, renewable electricity generation increased by 27% to 37.9TWh, with 14.4GW of installed capacity. Over the same period, renewable electricity accounted for 11% of total UK generation, and this proportion is set to increase to around 30% in 2020.

Solar photovoltaic (PV) showed the highest growth rate of the renewable technologies, increasing capacity by 550% to 1.4GW. Over the same period, average costs for solar PV fell by 50%, and it has now been included for the first time as a key technology in the DECC's UK Roadmap as large-scale solar becomes more feasible, with government estimates for installed capacity by 2020 in the region of 7GW to 20GW.

Onshore wind increased by 24% to 5.3GW over the same period, and new legislation will empower local communities to have more say over the development of onshore wind farms, with improved options for direct benefits. This industry has significant economic benefits, contributing over GBP5m to the economy and supporting more than 8,600 jobs, with expectations of supporting a further 3,000 jobs by 2020.

Meanwhile, offshore wind increased by 60% to 2.5GW over the year to June 2012 and, with costs expected to reduce by around one-third to under GBP100/MWh by 2020, offshore wind will make up an increasing proportion of generation with up to 18GW of offshore wind capacity deployed by 2020 if costs are reduced significantly, and the potential for 40GW of installed capacity by 2030.

Marine wave and tidal technology is maturing, and is likely to develop through the 2020s into a highly predictable energy source with as much as 27GW of installed capacity by 2050.

Decarbonizing heat production remains a priority for the government, with production increasing by 5% to 14TWh in the year up to June 2012. The introduction of the Renewable Heat Incentive (RHI) and the Renewable Heat Premium Payment will take time to settle before helping to develop the industry, but household consumers may benefit in 2013 alongside small-scale feed-in tariffs and the Green Deal.

Natural gas is expected to remain the dominant fuel supply for heating domestic and commercial buildings, but heat pumps will be supported and heat networks in urban areas will be encouraged. Biomass and biomass boilers are likely to gain increased market share for heat generation, especially in rural areas, but the change of the proposed rate under the RHI from GBP0.03/kWh to GBP0.01/kWh was devastating in 2012 for biomass projects of more than 1MW that were already planned.

Grid issues are likely to arise from increased electricity demand of between 30% and 100% by 2050 due to increased electrification of heating, transport, and industrial processes coupled with higher proportions of electricity supply from intermittent sources such as wind farms. This will mean that it will be increasingly important to develop key balancing technologies and to promote investment in smarter network infrastructure.

Renewable transport is on target to meet the Renewable Transport Fuel Obligation of 5% by 2014, but a Europe-wide law to limit second generation biofuels to 5% of the transport fuel mix will mean that further decarbonization of the transport sector will require third generation biofuels that do not compete with food crops (such as algae) and increasing the penetration of electric vehicles. The focus in the transport sector will be on improving plug-in vehicle infrastructure and supporting innovation in energy storage and management systems, lightweight vehicles, and power electronics.

Bioenergy accounted for 38% of renewable electricity generation in the 12 months to the end of June 2012, and co-firing of biomass to replace coal in existing power stations is currently the most cost-effective solution to reducing fossil fuel emissions. However, new build power stations for dedicated biomass generation have received less support, and the introduction of a non-legislative cap of 400MW was announced under the Renewable Obligation Banding Review in July 2012. There is now considerable emphasis on the sustainability of biomass feedstock for power generation, with the UK aiming to introduce mandatory standards for eligibility for support under the obligation alongside emissions standards.

Carbon capture and storage (CCS) is still in trial phases, despite being crucial to reducing up to 20% of emissions by 2050 according to the government's decarbonization plans. It is expected to play a key role in reducing emissions after 2020, especially where fuel switching is not feasible; however, with the low price of carbon, progress in CCS technology has been slow, and costs are presently too high for widespread commercial deployment.

In summary, the progress of renewable energy technologies is promising, and reducing costs remains the greatest challenge for every technology. As costs are reduced, government support is expected to decrease, and over the course of 2013-14, average consumer energy bills are expected to decrease by around GBP6 per household. Promoting investment remains a challenge for the government, and reducing uncertainty through the provision of clear and reliable support structures will be critical in this.

Source: MarketLine

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