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Renewable en Britain make nergy: could e the switch?

AGENDA

The Government's energy white paper pledged an annual support of £1 billion for renewable energy by 2010, but is it enough and will it work? Emma Crates reports

THE NUCLEAR lobby was nervous, the renewables sector on tenterhooks but, when it was finally launched last week, the Government's energy white paper managed to disappoint both ends of the energy spectrum.

The slick, 138-page document was long on rhetoric and short on reassurances for a sector hamstrung by financial uncertainty. And it contained more fudges than a Cornish county fair.

On the one hand the Government said it had no plans to build nuclear power stations - but left the door open should its renewables policy fail. And on the renewables side it transformed targets into 'aspirations', which could be a dangerous disincentive in an uncertain market.

'This is the first time the British Government has put the environment at the heart of its energy policy, ' said trade and industry secretary Patricia Hewitt.

The ambition was breathtaking: to cut carbon emissions by 60 per cent by 2050, with the interim 'ambition' of doubling the share of electricity from renewables to 20 per cent by 2020.

The white paper stressed the need for the Government to set a good example to other countries and lobby for firm commitments on reducing carbon emissions worldwide.

But the UK players were hoping the Government would show more leadership at home. Many dismissed the 2050 target as meaningless.

'It is a long way to look ahead in what is essentially a hand-to-mouth society, ' said consultant Dr Malcolm Kennedy, a former chairman of PB Power. 'There is no credibility in talking beyond 2020.'

Falling electricity prices have sent the energy sector into a tailspin. The wholesale price of electricity has dropped 40 per cent in the past 18 months, badly hitting power generation companies.

Power stations are being mothballed at a rate of knots, and gas-fired projects have been put on hold. Just one is going ahead - the 100 MW gas-fired power station at Coolkeeragh in Northern Ireland. The nuclear sector has been hit even harder. Last year, British Energy had to be bailed out by the Government, which now owns a 65 per cent stake in the company.

To help foster the fledgling renewables market, which currently accounts for less than 3 per cent of total power generation in the UK, the Government has put its nuclear plans on hold and is sticking by its original target that 10 per cent of this country's energy will be supplied from renewable sources by 2010.

The white paper claimed that incentives such as exempting renewable electricity from the climate change levy, and the Renewables Obligation (a Government order, which forces energy suppliers in England and Wales to take a percentage of their power from renewable sources), will be worth £1 billion a year to the renewables industry by 2010.

The Government admitted the 2010 target would be 'very challenging'. Others predicted it would be impossible to achieve. To hit the target the UK would have to install approximately 10,000 MW of capacity, at an annual build rate of more than 1,250 MW.

Gordon Edge, editor of Platts Renewable Energy Report warned: 'We're likely to miss the target. In 2010 renewable energy provision could be as low as 6 per cent.'

There is no shortage of contractors eager to join the sector. Companies staking out their territory in renewables include Amec, Birse, Babtie, Atkins and Arup. The hurdle they have to overcome is market uncertainty.

Renewable energy providers have been hit by plunging electricity prices in the same way as their nuclear and gas-fired cousins. Although they have a financial buffer through Renewable Obligation Certificates, electricity prices still fluctuate with market forces and are a disincentive to investment.

'Denmark and Germany are storming ahead with renewables because the cost of their electricity is guaranteed by price per kW/hr, ' said Dr Kennedy.

The cost of connecting renewable energy into the national grid could also prove a barrier to entry for both large and small-scale renewable projects.

The UK's electricity infrastructure has been designed so that large-scale generators feed their power into the grid.

But renewable generators are likely to be much smaller in scale. If they are under 132 kV, the electricity will be fed into a lower-voltage local distribution system.

Distribution networks have been designed to take power from the grid, rather than feed into it, and the cost of adapting them could run into billions of pounds.

Dr Kennedy estimated that three renewable generators a day would have to be connected into the system to meet the 2010 target.

'This is a very high rate of build and the distribution systems were never designed for this. It will take a lot of investment to make them capable. We'll need more transmission lines, more transformers and more control devices, ' he said.

'We were pleased to see the reference in the white paper for the need for infrastructure strengthening, but there is no incentive for the distribution network operator to carry that out.'

He added that off-shore wave and wind farms, which are more expensive to build and install, are likely to have even greater problems in finding backing than on-shore facilities.

'The banks are already worried about the reliability of off-shore. The only off-shore projects going ahead are with the big companies that can pay for them off their own balance sheets, ' said Dr Kennedy.

An analyst with consultant Douglas Westwood agreed.

'Off-shore developments are barely economically viable.

The cost of installation, which requires specialist foundations and sub sea cabling, is much higher than on-shore.'

It was probably uncertainty in the markets and astronomical costs that have led to schemes such as the West Coast Sub Sea Cable being put on hold. This ambitious plan to connect renewable wind power on the western coast of England and Wales seems dead in the water.

'The West Coast Sub Sea Cable was a bright idea. But no one picked it up and ran with it. It would need several developers - and long-term market assurance - to get off the ground, ' said Mr Edge.

'The Government needs to show leadership on the transmission and distribution side. It should underwrite a project for investment in transmission.'

But for those companies keen to wade into the renewables sector, Mr Edge suggested they head for Scotland.

'The Scottish Executive is much more switched on than other UK regions in terms of planning and attitude. The Welsh Assembly has sustainability written into its statute, but it hasn't performed that well.

'In England some local authorities are progressive but there's not much leadership shown from anyone.'

The alternatives (1) - wind power

Wind power is the most advanced area of the renewables sector in terms of market uptake.

Players and Projects:

Amec's wind energy department now has 35 dedicated employees. The company, in partnership with Forest Enterprise, has proposals to build three on-shore windfarms: A 50-turbine farm near Clashindarroch Forest, Aberdeenshire; 30 turbines in Keith, Moray; and 14 turbines in Minch Moor, in the Scottish Borders.

Birse has been awarded the contract for the civil and electrical design and construction of Crystal Rig, a 20-turbine on-shore farm in the Scottish Boarders.

A 140-turbine windfarm, providing 490 MW of power is proposed off the coast of Arklow in Ireland. The developer is Airtricity.

Canadian firm Talisman is planning a large-scale off-shore windfarm in the Murray Firth. The turbines will be built off shore round the old Beatrice oil rigs.

British Energy is considering a 600-900 MW wind farm on the Isle of Lewis in the Western Isles which could be the largest in the world.

What they said:

The British Wind Energy Association: 'There are 1,005 working turbines in the UK, contributing 555 MW. That's enough for more than 360,000 homes, or every house in Norfolk. Based on the activities of our member companies, we estimate that wind power will contribute more than 11,000 MW by 2010. There will need to be a 20-fold increase in the number of turbines.'

The white paper: A second round of windfarm site allocations is planned for spring 2003.

The Government will also bring forward legislation to enable the granting of licences for off-shore windfarm developments beyond UK territorial waters.

The alternatives (2)

The Government is increasing funding for renewables capital grants by £60 million, additional to the £38 million extra funding announced in the 2002 Spending Review. It has pledged to reform the planning laws to speed up the building of renewable energy facilities. But the prospects for different sectors varies widely

Wave and tidal power

The wave and tidal sector is currently in embryonic stage. But the Government predicts that the sector could be commercially viable between 2010 and 2015.

Winners:

A consortium, led by tidal Hydraulic Generators has won £1.6 million in funding to develop the world's first prototype of a tidal stream generator in Pembroke, Wales. The project involves building a 30-turbine system on the sea bed. Babtie is designing the sub-sea template and carrying out environmental impact assessments for the job.

David Baird, managing director of Babtie Group's Facilities Business Centre, said: 'The full-scale version is expected to provide power for 500 homes. Tidal power is a growth area for Babtie.'

Wavegen, in Inverness, has secured £2.3 million in funding for a series of wave energy devices off the Western Isles of Scotland.

Losers:

The Severn Barrage: The controversial £10-£14 billion project to build a barrage from Cardiff to Western Super Mare has been hotly debated since the 1980s and is now almost certainly a dead duck due to environmental and economic considerations.

Biomass

The energy white paper predicts that biomass, which is anything derived from plant or animal matter that can be used for fuel, may be economically viable in the mid 2010s.

The Government pledged £60 million for biomass generation projects when it launched its BioGrants Capital scheme last summer, but industry claims that it has botched the funding process.

To receive grants power stations of more than 20 MW have to source a large part of their fuel from energy crops such as coppice or willow. Unfortunately the agricultural sector has yet to catch up. So the crops are too rare or expensive to make such plants viable.

Peter Wright, of Energy Power Resources' Project Development division, said: 'We have a number of business projects on hold. None of them makes sense in the current climate.'

Solar power

The Government has earmarked photovoltaics as a growth market. In April 2002 it launched a £20 million grant scheme, to be distributed over a three-year programme. But the support compares poorly to countries such as Germany which has a £300 million 10-year investment programme in photovoltaics.

Dominic Burbridge, head of commercial projects with photovoltaics consultancy Solar Century, said: 'The big architects, mechanical and electrical firms and consultants are all looking at this area. With incentives such as net metering - whereby consumers sell excess electricity back to the grid - housing developers are proving particularly interested.

'The panels have a life expectancy of 30-50 years, but they could keep working after that.

The long warranty makes them an attractive prospect for PFI.'

Housing British homes use 20 per cent more energy than their equivalents in Denmark. The Government highlighted domestic energy efficiency as a part of the low carbon economy.

White paper targets include:

Installing 5 million condensing boilers in homes.

Insulating around 4.5 million cavity walls between 2005 and 2010.

The Government is also bringing forward the revision of the building regulations - originally scheduled for 2008 - to 2005.

John Tebbit of the Construction Products Association said: 'If the Government is going to have targets, they must be clear and unambiguous. The white paper has few unambiguous targets other than cavity wall insulation. The Government must allow industry to develop solutions. We hope it doesn't become too prescriptive.'

The House Builders Federation said: 'There's a trade-off of raising the energy efficiency and the amount it will cost new homes developers. It would be great if they could introduce tax breaks in areas such as photovoltaics.'