Friday, March 30, 2012

Nuclear power can't happen without subsidy. So it shouldn't happen.

Wylfa nuclear power station
Wylfa nuclear power station on Anglesey/Ynys Mon.

“A new generation of nuclear power stations will only be possible with vast taxpayer subsidies or a rigged market.”

Guess who said that? Well, it was our very own Secretary of State for Energy and Climate Change, Ed Davey, when he was the Liberal Democrat's Shadow Trade and Industry Secretary, on 17th July 2006.

And, on 6th February this year he followed this up with: “new nuclear can go ahead so long as it’s without subsidy".

Put these two statements together, and what do you get?

Quite. Mr. Davey was right in 2006, and he is even more right in 2012: nuclear power can't happen without subsidy.

The decision by Horizon, the consortium run by German energy firms EON and RWE npower to pull out of developing new nuclear power projects in the UK supports this thesis and has brought dismay to the governments in Westminster and Cardiff.

The Welsh Assembly Government feels particularly let down because it had only just published its Energy Wales policy document which, for the first time, had committed Wales to support nuclear power and had placed Horizon's anticipated new power station on Anglesey as a key plank of its policy to ‘create a sustainable, low carbon economy for Wales’.

What will it now do to make sure it meets its policy targets? A spokesperson for the Welsh government would add no more to the official line that "there is live and significant interest in the site", and "we are seeking the full support of the UK Government as we work with Horizon to deliver this investment and secure jobs for workers at Wylfa in the future".

Perhaps it hadn't really sunk in that Horizon is no longer interested. And what did he mean by support from the UK Government? It couldn't be the S-word, could it?

Volker Beckers, CEO of RWE npower, told BBC Radio 4's Today programme that the decision has been made purely on strategic grounds, both adding that the recession was a factor.

Westminster is putting a brave face on this major setback to its masterplan. There is interest from other companies, but the undeniable truth is that the capital intensity of constructing and underwriting the costs of nuclear power makes it impossible for any player to enter the market without state support.

This was in effect admitted on Friday morning by Malcolm Grimston, associate fellow at the Energy, Environment and Development programme at Chatham House, when he said that "electricity is too important to be left to the free market and therefore the government has a central role to play".

Existing nuclear subsidies

Of course, subsidies already exist. Here are six of them:

1. Charles Hendry, Minister of State for Energy, has just made nuclear power even more expensive for operators (although this move was widely expected), by announcing on Friday that the operator's liability in the event of a nuclear accident will be raised from £140 million to €1.2bn, or just over £1 billion.

This removes some of what is an effective subsidy from the taxpayer to nuclear operators. However, in the event of a really serious accident, there is no doubt that the cost of reparation would be much higher than £1 billion: £800 billion is the current level of the cleanup bill at Fukushima. And this will be borne by the taxpayer.

2. Under the proposed Electricity Market Reform, the Contracts for Difference Feed in Tariffs will provide a subsidy of between £63 billion and £75 billion to EDF, the only nuclear player left in town, over the next 35 years. That is nearly £2.0 billion a year.

3. Waste disposal costs will also be subsidised since the Government has proposed capping the nuclear industry’s liabilities. Currently, DECC spends £6.93 billion a year, 86% of its budget, on managing nuclear waste and other liabilities from Britain’s current nuclear power programme: over eight times more than it spends on securing our future energy and climate security.

4. The four campaigners calculate that it is likely that new nuclear build in Britain will require the creation of special purpose financing mechanisms to protect the balance sheets of the proposers, even a well-apitalised company like EDF in the form of loan guarantees.

5. Dozens of agencies, offices, quangos and departments support the nuclear industry, costing billions of pounds per year. Similar levels of support do not exist for other low carbon technologies.

6. Finally, it is impossible to have nuclear power without huge security and counter-terrorism costs. Most of this is paid for by the taxpayer, but official secrecy prevents us from knowing how much.

These and other ways in which the taxpayer supports nuclear power and will support new nuclear power stations, are summarised in a briefing prepared for the government this week by antinuclear ex-directors of Friends of the Earth, Tom Burke, Tony Juniper, Jonathon Porritt and Charles Secrett.

It's not just the UK

The same S-word dilemma is occurring everywhere and getting worse. And it's not just woolly eco-freaks saying so.

At a symposium this week on the Future of Nuclear Power hosted by the Dick Thornburgh Forum for Law and Public Policy of the University of Pittsburgh, this extremely authoritative and august body, speaking from the birthplace of nuclear power, admitted the following in a comprehensive report on Nuclear Safety and Nuclear Economics, written by Mark Cooper, Ph.D., Senior Fellow for Economic Analysis, at the Institute for Energy and the Environment:

"The subsidy problem in nuclear reactor construction has actually become much more severe," he writes.

Besides increased liabilities resulting from heightened safety awareness following the Fukushima accident, "The utilities proposing new nuclear reactors have demanded many more and larger direct subsidies".

He continues: "Since construction of nuclear reactors cannot be financed in normal capital markets, federal loan guarantees and partnership with public power that has independent bonding authority appear to be necessary ingredients to move projects forward."

We shouldn't have to point out the ludicrous irony of the Tory part of the coalition, which is the half that actively supports nuclear power, relying on a socialist French government, which supports a nationalised industry, to bring about with British subsidies the nuclear power it wants in the UK.

Why not just abandon nuclear power?

All of this makes absurd the claim that nuclear power is the cheapest form of new generation that is continually made by the Government, most recently in its 2011 update of the costs of new generation capacity.

If even just one of EDF's proposed new nuclear power stations goes ahead (and they still haven't submitted a timetable for construction) there is absolutely no doubt that the country will regret it in the future.

And to those who say we need nuclear newbuild to combat climate change, I say with the billions saved from scrapping all the currents subsidies listed above we could build the equivalent amount of new renewable generation plant and install more energy saving products far quicker and with far better value for money and far more British jobs.

Government leaves domestic biogas and microbes CCS out of its heat strategy

solar water heating

The Government has launched a consultation on its strategy for decarbonising heat which omits domestic biogas and the method favoured by Richard Branson for carbon capture.

This is the second consultation on the topic of heat in three years; the last one resulted in the Renewable Heat Incentive and the Green Deal. This one attempts to envisage how the market will be transformed as a result, and as part of the goal of supplying 15% of UK energy from renewables by 2020.

Launching the consultation, Energy and Climate Change Secretary Edward Davey spoke of the need to cut emissions from the way we generate heat and said that many towns, cities and communities across the UK are already switching from fossil fuels to low carbon forms of heating like biomass, heat pumps and solar thermal.

“I want to give the opportunity to others to follow the pioneers," he said, “so that in time, our buildings are no longer dependent on burning fossil fuels for heat but using affordable and reliable alternatives to help create a flourishing, competitive low carbon manufacturing industry."

Alongside the consultation DECC published a series of electronic maps which show the heat demand from buildings across England, aimed at developers so they might identify areas in most need of low carbon heating projects and local authorities.

Demand reduction

The document envisages different solutions for different locations and geographies, as households, businesses and local authorities choose the approach that will work best for their circumstances.

It proceeds logically through an examination of measures to reduce the wastage of heat and hence demand, through to an examination of means to supply the remaining demand.

In particular there is emphasis on the potential for expansion in the heat pumps market and the solar thermal market. In 2010, the UK heat pump market alone was worth nearly £50m, and the solar thermal market grew 24% to £25m.

Heat networks

There is also hope expressed that more heat networks will be installed by, for example, integrating them with local authority plans for urban growth and regeneration.

The document notes that such networks can be the most effective way of supplying low carbon heat to buildings, offering the benefit of flexibility, since a number of different heat sources, such as biomass and gas boilers, combined heat and power (CHP) plants and heat from energy-from-waste plants, can supply the same network.

However, they have a high upfront cost due to the need to install the pipework, and to their dependence on municipal vision. Hence, although widespread in Europe, there are a few examples in this country, exceptions being Nottingham, Sheffield, Birmingham, Aberdeen, Southampton and a new project in Newcastle which is to be supplied from geothermal heat.

The Newcastle borehole will eventually reach 1821m and tap into water at a temperature of 80 deg. C, which will be used to heat a new science park.

Nottingham's one of the largest district heating networks in the UK, with a 65km network serving over 4,600 homes and 100 businesses and public sector properties; roughly 3.5% of the city’s entire heat consumption.

Measures for industry

The consultation also examines the decarbonisation of process heat for industry to create a separate strategy. "By focusing on biomass, biogas and electrification, as well as innovative technologies like Carbon Capture and Storage, we have the opportunity to achieve a competitive advantage, winning contracts abroad in a new and thriving global market," it says.

It recognises six major subdivisions of industry which will need their own specialised attention. These are: Coke and refined petroleum, food and drink, pulp and paper, basic metals, non-metallics and chemicals.

It sees particular opportunities for combined heat and power, which is ironic considering that George Osborne removed support from the technology in his budget two weeks ago.


Responding to the Heat Strategy, Energy Networks Association (ENA) Chief Executive, David Smith, expressed disappointment that “domestic use of bio-gas has not been considered. As the Strategy points out, currently 81% of the UK uses gas for its heat and hot water.

"To ignore a potential fuel source which can use existing domestic heat infrastructure seems bizarre to say the least.

“With the proposal that gas for domestic heat be phased in only a decade or so the Strategy has also failed to consider the cost implications for the public."

The ENA is undertaking a major study on domestic heat out to 2050 that will be published in early May.

The Strategy does refer to biomethane injection into the gas grid for the industrial sector. It notes that the Renewable Heat Incentive (RHI) currently only gives support for biogas from anaerobic digestion, sewage gas and syngas for heating equipment with a capacity of less than 200kWh.

It says that the Government will consult on removing this limit or setting a higher limit in September.

Hot air

The RHI is currently limited to supporting installations which generate hot water or steam through a boiler or engine, as these can be metered relatively easily.

The Government is also considering the inclusion of equipment which can heat air directly, thereby potentially expanding the type and number of industrial uses of bioenergy which the RHI supports.

Electrification and carbon storage

The strategy also notes the potential for carbon capture and storage at a small, industrial scale. But it does not seem to be aware of the latest technologies such as the use of microbes, as supported by Richard Branson's Virgin Atlantic.

In the short term it expects industry to concentrate on energy efficiency, switching to low temperature processes and sustainable biomass, using CHP and fuel switching.

After 2020 is looking for even greater efficiency of thermal processes using heat recovery or reuse between high and low temperature processes, greater use of biogas and sustainable biomass, and further electrification of lower temperature processes, for example through direct electric steam generation as the grid itself is the carbonised.

In the longer term wider deployment of carbon capture and storage is anticipated to capture the remaining inherent process emissions. Further fuel switching to electricity and biomass for the remaining high-temperature processes is also expected.

Roger Webb, director of the Heating and Hot Water Industry Council (HHIC), thought this could be a problem. "From the strategy it seems there is a big push on electricity rather than fossil fuels - so the main question is how quickly can we move forward to low carbon electricity?"

DECC expects to receive responses by May 24, expand its evidence base and produce a range of policy proposals around the beginning of next year.

Renewables generated 9.5% of UK electricity in 2011

wind turbine

Renewable energy generation expanded by 10% and carbon emissions fell by 7% in 2011.

Renewable energy generation was responsible for 9.5% of all electricity supplied in the UK in 2011, failing to hit the magic 10% mark that had been predicted, according to the latest energy statistics from DECC - but renewable transport fuels are lagging behind targets.

But this is an increase of 35.1% on the previous year, when renewables accounted for 6.8% all electricity.

The lion's share of this was from thermal renewables, i.e. biomass, landfill gas and waste-to-energy, which accounted for 13.27TWh, and onshore wind which accounted for 10.42TWh.

Renewable electricity capacity also rose, by 32.1% on the previous year to 12.2 GW at the end of 2011.

Latest figures (March 25) show that the U.K.'s solar photovoltaic capacity for installations under the feed-in tariff is now 1.02 GW spread over a total of 298,762 installations.

Greenhouse gas emissions fall

The U.K.'s greenhouse gas emissions also fell by 7% last year, according to new figures released today.

This means that since 1990, the baseline year for the Kyoto Protocol, the U.K.'s carbon dioxide emissions have decreased by 23%, while overall energy consumption has decreased by 5%.

The fall last year is mainly due to reduced use of gas in the domestic sector, where emissions fell by 22%, but also due to more nuclear coming back on stream after outages the previous year, and reduced energy overall consumption due to the recession.

Total consumption of fuel fell by 2.2% last year, with gas taking the largest hit with a fall of 8.9%. Consumption of coal and other solid fuels rose by 9.3%

Emissions from the energy supply sector were estimated to be around 24% lower in 2011 than they were in 1990.

Commenting on the figures, Energy and Climate Change Secretary, Edward Davey said: “This is more evidence of how the UK is leading the way in the fight against climate change. Carbon emissions are down, homes are more energy efficient and low carbon power is up. Thanks to the Green Deal and the Government’s reforms to the electricity market I hope to see this trend continue and gather pace.”

Expansion continues

The improved renewable generation figures were helped by high rainfall in areas where hydroelectric generation takes place, and increased wind speeds. Hydro had a 58% increase on the previous year.

In fact, all renewable energy sources experienced expansion as the following table shows:

Renewable electricity sourceTWh% change on 2010
Onshore wind10.42+45.9
Offshore wind5.11+67.9
Thermal renewables (inc. co-firing)13.27+11.4
All renewables34.75 +35.1

Primary electricity consumption from nuclear and non-thermal renewables rose by 16.3%.

Nuclear generation rose by 11.1% mainly because there were extensive outages the previous year.

This means that low carbon generation including renewables accounts for 28.4% of all electricity generation in 2011 compared to 23.3% the previous year.

Renewable transport fuel

In the area of renewable transport, in 2011, biofuels accounted for just 3.5% of all transport fuels, less than the previous year.

The UK has a target of 5% under the Renewable Transport Fuels Obligation (RTFO) and now has one year to reach that target.

1,577 million litres of liquid biofuels were consumed in 2011, a fall of 5.9% on 2010's record annual high of 1,676 million litres,

A spokesperson for the Department for Transport said that despite the figures the UK is on track to meet the target because suppliers are stockpiling certificates to surrender in the future, representing the difference between what is used and what is held in stock by them.

Under the RTFO, suppliers can either produce or buy biofuels, or pay into a buy-out fund or purchase certificates from another company. Certificates can account for no more than 25% of the biofuels they hold. One Renewable Transport Fuel Certificate (RTFC) is equivalent to one litre of biofuel or kg of biogas.

The official said that companies hold certificates over from one year to the next if it is profitable for them to do so. They are currently betting that they will get a better prices in the coming year.

Transport is the hardest area to tackle in terms of reducing emissions. Its emissions are roughly unchanged from 1990 levels. Between 2010 and 2011 transport emissions decreased by 1.4%, and are now at their lowest since 1992, but they had been rising up until the recession began in 2007.

Since December 2011, the RTFO includes mandatory sustainability criteria, which included accounting for the carbon emissions of growing and transporting the fuels, and the impact on land use for food production.


Average industrial gas prices, including the CCL, were 15.9% higher in real terms in the last quarter of 2011 compared to the same period in 2010, whilst prices excluding CCL were 16.1% higher.

Average industrial electricity prices worth 3.5% higher including the CCL and 3.6% excluding it in the last quarter of 2011 compared to the corresponding quarter a year earlier.

Prices of all fuels, of course, rose last year, by an average of 9.5%, but within this electricity prices rose the least, by only 3.5%.

In fact it was heavy fuel oil which rose the most, by a staggering 19.1%, followed by gas prices which rose by 15.9%. Despite this, the price of unleaded petrol rose by only 4.6% and diesel by 5.1%.

UK industrial gas prices were the lowest in the EU15 for all types of consumer including and excluding tax.

During the last half of the year, industrial medium, large and extra large electricity consumers suffered prices higher than the median for the EU15 countries but small and domestic consumers had lower than average prices.

This means that the average domestic gas bill rose by £61 and the average electricity bill rose by £36 last year, the lowest and fourth lowest in the EU 15 respectively.

Monday, March 26, 2012

UK Solar industry predicts 1GW of installations in the next year

ground-mounted solar farm in the UK
We're going to see a lot more of these in the UK.

The UK solar industry now sees a bright future for itself following last Friday's decision by the Supreme Court to refuse the Government permission to appeal on the ruling that solar PV installations registered after December 12 last year and before March 3 this year could qualify for the 43.3p kWh subsidy rather than the 21p rate the Government tried to enforce.

Many companies have plans for large-scale solar in particular because they see new possibilities from the Renewables Obligation Certification scheme (ROCs), which gives two ROCs for each MWh for schemes over 5MW, and under which there is no size limit.

There is even talk of solar farms as large as those found in Europe, up to even 40MW in size, in the south of England. One player predicts 1GW of plant installed in the UK over the next year.

Emma Hughes of Solar power Portal says that "now that the feed-in tariff fiasco has reached a conclusion many are looking forward to working in the UK solar industry in 2012, especially now there is opportunity under the Renewables Obligation."

REC Solar, Canadian Solar, Q-Cells and many others are all of the opinion that if the component prices decline as expected, and energy bills continue to rise, opportunities for ground-mounted solar to become cost-effective will increase.

REC Solar is hoping to double its capacity this year by installing approximately 60MW, a large proportion of which will be ground mounted.


At the domestic and business consumer level, more than anything else the government has done, the installation of panels on so many roofs across the country has got people talking about energy and its importance.

All over the country this weekend, owners of homes who had installed green equipment or upgrades threw open their doors for visitors interested in doing eco-refits themselves.

Besides solar PV systems, visitors to the 'green showhomes' on these tours saw every type of upgrade from simple insulation and draught proofing measures to complete overhauls and rebuilds, involving many types of green heating from woodchip fired boilers to solar water heating systems, and even in one case, a tank which combined four different kinds of heating.

Many of those on the tours had had their interest in the subject first aroused by seeing solar panels on neighbours roofs.

This indicates that a chief aim of government policy has succeeded: increasing public awareness in energy matters, even though investment in photovoltaic technology in this country is not cost-effective at the level of subsidy initially set by the feed in tariffs.

But although many of the thousands of people on these tours knew about the Feed-in Tariffs, a high level of ignorance was revealed about the follow-up schemes, the Renewable Heat Incentive and the Green Deal, indicating the huge amount of work that the Government yet has to do to publicise these initiatives.

The 'Superhomes' tours were organised by volunteers in many towns and cities in England and Wales, either by the network members themselves, or local Transition Towns groups.

Several were oversubscribed, indicating the increased popularity of the subject, further evidence of which was the changed nature of last week's Ecobuild exhibition in London, which was far more upbeat, corporate and mainstream than it had been in previous years, with much floor space taken up by solar and heat pump installers.

Speaking at the Ecobuild exhibition, Energy and Climate Change Minister, Greg Barker said: “This is an aspirational agenda. We know people are always looking to improve their home even in times of austerity. It’s part of the British DNA.”

John Gaffney, who organised a tour in and around Llandeilo in Carmarthenshire, said “many of the homes we have seen this weekend who have solar photovoltaic panels installed still think it is worth the investment even with the reduced tariff."

“It seems so complicated from the outside, knowing what to do," said one of the super homes tourists, Peter Jones of Llangadog, "But seeing what other people have already done is a terrific help in getting ideas about what is possible in your own circumstances."

A highlight of this tour was a home which had both water and space heating supplied by both a ground source heat pump and solar water heating panels, with the electricity for the pumps supplied by photovoltaic solar panels supported by FITs. “We generate more energy than we need, so we are still actually paid by the energy supplier after we have used all the energy ourselves," said owner Caroline Langdon.

Green Deal red tape removed

Last week, Greg Barker sought to remove doubts that the Green Deal implementation would be delayed, but did say there will be a “managed” roll-out of the scheme, meaning that some aspects will launch before others, chief of which may be the Energy Company Obligation, which is simpler to arrange.

He said that the Government would be responding to the Green Deal consultation in April and secondary legislation would appear “by summer recess”.

"This doesn't affect the planned October launch,” he said.

He told attendees to the exhibition that red tape was being removed from those who wanted to become accredited installers, including the requirements to have a surety bond in place prior to being authorised; to hold warranties for the 25 year length of the plan when they were longer than standard industry warranties, e.g. for boilers,; and the requirement that installers pay for an Independent Conciliation Service.

Instead, a new Green Deal Ombudsman capable of handling complaints will be appointed.

"Remove stamp duty"

UK Green Building Council chief Paul King has called the Government’s handling of the solar FITs “catastrophic” and said it is now crucial that the Government instills confidence in businesses preparing for the Green Deal.

This weekend, many visitors on the superhomes tours expressed fears that if they invested in renewable heat systems that the tariff rate for these would be reduced in the future. Many appeared unaware that tariff rate reductions did not affect those whose installations had met the deadlines.

In this respect the public perception arising from the solar FITs fiasco has been extremely damaging.

To rebuild confidence, and create more publicity, Paul King has called on the Government to link the Green Deal with stamp duty and council tax, making less energy efficient homes pay more through the tax system.

He said it didn't matter if the implementation of the Green Deal was delayed if it meant that its integrity would be preserved and the fine detail was in place and did not have to be amended subsequently.

He said: “I would much rather delay it rather than go and blunder it as it will take 10 years to get it out of the public consciousness.

Collective energy purchasing

In a further bid to engage consumers with energy purchasing, today, Ed Davey has written to all of the energy suppliers asking them to support collective purchasing schemes as another way of helping householders engage easily with the electricity market and bring prices down.

He wrote: "I want to make it easier for consumers to club together and use their collective purchasing power to engage with the market and to get good deals on their gas and electricity."

This was a key part of the Consumer Empowerment Strategy that Ed Davey launched as a Minister in the Department for Business Innovation and Skills last year.

He said particular you want to see schemes that reached out to “include more vulnerable customers and people who don't shop around for their gas and electricity".

The purpose of the letter is to encourage all energy suppliers to engage with these organisations on their ideas.

Could the Climate Change Act be used to curb new gas-fired plants?

DECC's decision to set EPCs at 450gCO2/kWh could be open to legal challenge.

It is now fashionable to term natural gas a “transitional" fuel on the road to a low or zero carbon economy at some vague point in the fuzzy future.

Just as many thought carbon capture and storage would be a “get out of jail free" card enabling business as usual (note: this does not include the International Panel on Climate Change), in the same way that many people once believed that quack doctors' miracle cures for ailments actually worked, gas is now the favourite conventional temporary solution to our climate change problems.

In January, I wrote that "low gas prices are the biggest threat to renewables", and this was borne out by the Chancellor's Budget and Ed Davey's announcement this week.

Ed Davey has decided that Emissions Performance Certificates for new gas-fired power stations can be set at 450g of CO2 per kilowatt hour until 2045, 15 years beyond the date recommended by the Committee on Climate Change.

To comply with the recommendations of the Committee, the emissions level would need to fall to 50g/kWh at 2030.

In that column, I wrote that "we must particularly guard against constructing more gas-fired power stations as this would lock us into higher emissions for twenty or more years".

Tory George Osborne and Lib-Dem Ed Davey seem to be united in this Coalition vision. We may not have shale gas in this country (yet) and it's unlikely that we ever will, nor is gas currently as cheap as coal to burn in power stations.

No, its big advantage is that a gas-fired power station can be up and running in two years, making electricity cheaper than wind power, with around half the emissions of coal.

Last week, Green MP Caroline Lucas asked Charles Hendry if he thought that the Committee's requirement that an 80% reduction in emissions by 2050 required that electricity generation be almost entirely decarbonised by 2030.

His response referred to last December's Carbon Plan, which looked at different scenarios consistent with meeting carbon budgets. He said that "Government are not setting an explicit decarbonisation goal for electricity generation in 2030 at this point, given the uncertainties involved in setting a target this far out, which include levels of electricity demand and cost-effectiveness of different technologies".

But the Government is setting the level of the playing field which helps define the cost-effectiveness of different technologies. Davey's pronouncement is part of that.

And it can also estimate very well for how long a gas-fired power station will continue generating if built in the next three to four years; it will certainly be doing so by 2030, just 14 years later.

According its own recent estimates, published in DECC’s Updated Emissions Projections in October 2011, an additional 4.9 gigawatts (GW) of new gas-fired electricity generation capacity is projected to come online by 2020.

Of this, 4.1GW is projected by 2016, but in reality it's even more than this: new gas projects with government consent currently amount to 16.2GW.

Information from National Grid and New Power shows that all of these projects could be online before 2020.

This level of unabated gas operating at 450g/kWh at 2030, let alone 2045, would make it impossible for the UK to meet its long-term carbon emission reduction goals.

Hendry is talking disingenuous nonsense.

The wind/gas future

Recent analysis by Platts on the electricity market argues that 'transitional' gas and wind power will form the backbone of the system in the near future.

They write: "This will be combined with baseload power from biomass and a declining amount of legacy coal and nuclear.

"Gas will act as the hydrocarbon bridge to a more sophisticated low carbon smart energy system that will include a greater range of RES, backed by demand response, storage and other clever means of balancing electricity supply with demand."

Platts' conclusion is that energy companies have two choices: either enter a declining competitive market or pursue renewables.

Platts calls renewables “subsidy-backed", but as we have seen from the Budget gas and oil are subsidised in their own way, by tax breaks for example, just as any other form of electricity generation.

Nevertheless, in simple levelised cost terms, seen from this point of view, wind has just about reached what we could term grid parity.

In this picture, gas is required to fill in the gaps when the wind isn't blowing sufficiently, and the gas power stations will remain idle when it is.

This gives us a picture of the future. In a competitive market, with a smart grid, buyers will choose whichever is the cheapest power source at that moment.

In the UK, the question is whether such a pattern will bring down emissions sufficiently to meet the U.K.'s legally-binding requirements under the Climate Change Act.

The next legal challenge

I have no doubt that Friends of the Earth, currently celebrating their third victory over the Department for Energy and Climate Change over solar feed-in tariffs that was announced on Friday, will be watching carefully to see if they can to mount a legal case themselves against Ed Davey's decision, on the grounds that it could lead to the UK failing to meet its carbon budgets under the provisions of the Climate Change Act.

Under this, the UK must have reduced its carbon emissions by 35% by 2022 and 50% by 2027.

As they have calculated, with this amount of gas generation that will be impossible.

Rhian Kelly, CBI Director for Business Environment policy, has commented on the Supreme Court’s ruling on feed-in tariffs, saying: “What’s important now is that the Government learns the lessons from this sorry solar saga.

“As it puts the finishing touches to reforms to electricity markets and the Green Deal, it must be sure it creates a stable, predictable policy framework which leads to investor confidence and generates jobs.”

Rhian Kelly, that is a nice dream. Government energy policy remains as stable as a galleon in a gale.

Thursday, March 22, 2012

Osborne's carbon-fuelled budget sets the scene for a gas-fired future

George Osborne
Would you trust this man to lower carbon emissions?
Budget 2012 will be remembered in the future as the trigger for a new era of gas-fired generation and oil exploration.
  • "A bad day for the environment" (John Sauven, executive director of Greenpeace).
  • “I am concerned about the focus that the Budget took on fossil fuels" (Mark Kenber, CEO of The Climate Group).
  • "Despite small green shoots of recovery, investor confidence, instability and uncertainty remain" (Michael Lunn, Environmental Industries Commission’s Director of Policy and Public Affairs).
  • "Sticks two fingers up at David Cameron's promise to build a clean future – and gives a massive thumbs down to new jobs and cutting our reliance on expensive gas and oil" (Andy Atkins, executive director of Friends of the Earth).
  • "We had hoped for greater clarity around future energy and emissions policies to enable better business and investment planning." (Melanie Leech, Director General of the Food and Drink Federation).
  • "We urgently need a long term, consistent policy framework to provide businesses with the confidence to invest in low carbon and energy efficient improvements" (Martin Baxter, Executive Director of Policy, Institute of Environmental Management and Assessment, who believes the Budget does not deliver this).
This fair sprinkling of reactions paints the broad brush picture. Read on for the Low Carbon Kid's comprehensive summary of the sector highlights of Mr. Osborne's third budget.

Carbon Reduction Commitment (CRC)

The Chancellor announced a review of the Carbon Reduction Commitment (CRC). Mr. Osborne said it is "cumbersome, bureaucratic and imposes unnecessary cost on business", and that if ways of improving it "cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax".

The CRC has few friends. The CBI, the Engineering Employers' Federation (EEF) and others felt he should have gone the whole way and announced its immediate dissolution. “The Government is wasting time by announcing yet another consultation," said the CBI's Director-General John Cridland.

Gareth Stace, head of environment and climate policy at the EEF, welcomed the news, saying "no amount of tinkering with this doomed tax on British business will ever make it work and therefore the government should scrap the scheme".

But the CRC is not completely isolated. KPMG's lead CRC advisor, Ben Wielgus, cautioned that "the introduction of a tax alone would be unlikely to deliver on all aspects of the CRC: namely the reputational drivers and focus on energy usage that are core to the scheme at present".

"Any reporting requirements would create an administrative burden on business and would need to be carefully designed to ensure that any replacement actually reduces administrative costs compared to the CRC," he added.

Michael Lunn of the Environmental Industries Commission was even more sceptical: "Having previously diverted funds raised from the CRC Scheme from green initiatives into general taxation, the Chancellor has now announced that it must be simplified, or scrapped. This sends a very unhelpful message to those companies working their internal budgets and committing funds to comply with a regulation that may become redundant in just a few months’ time," he said.

"Constant policy changes are detrimental to business and growth in the green economy, and we need to put in place a long-term, predictable and ambitious environmental policy framework right across the UK economy."

Martin Baxter, Executive Director of Policy, Institute of Environmental Management and Assessment (IEMA), said he was "disappointed that the government has not taken a longer term approach, as this would provide business with more certainty for investment and effective action on climate change″.

He said he was looking forward to an announcement on mandatory GHG reporting for business, "which will provide benefits for both the UK economy and the environment, by delivering cost and carbon savings”.

The Chancellor said that allowances sold with respect to 2012–13 emissions will be set at £12 per tonne of carbon dioxide, half as much again as the current carbon market price.

Carbon price floor

The Carbon Price Floor is designed to ensure that greenhouse gas emitters pay a price for their emissions, and will be set at £9.55 per tonne of carbon dioxide from 2014–15.

The EEF estimates this will lead to a 6-7% increase in industrial electricity prices and “locks the UK into higher energy taxes than our competitors, regardless of the European carbon price".

Its Gareth Stace said this "contradicts the government’s stance that the UK will go no faster than our partners in Europe.”

Greenpeace slammed it as a "stealth tax" which the Chancellor regards as an opportunity to raise revenue. "To drive investment in the clean technologies that would cut carbon and bring down bills he should instead have said the revenues would be ring-fenced to support ending our addiction to dirty fossil fuels,” said Dr Doug Parr, policy director for Greenpeace.

The CBI called the new level a “33% rise" that would "hit UK energy-intensive businesses hard, and underlines the need for a more coherent strategy to unlock low-carbon industrial growth".

“In the meantime, we urgently need support to those companies most at risk from the increase,” said John Cridland, which the Chancellor already has announced he is doing with £100 million over the Spending Review period.

Combined Heat and Power

"Combined Heat and Power plants will not be liable to carbon price support rates on fuels used for heat," said the Chancellor, in a move which only partially reinstates the tax break on CHP he removed last year.

This was criticised by Graham Meeks, director of the Combined Heat and Power Association, who said that the break "was what allowed these plants to compete in the power market. He has not restored this, and that's very negative".

The positive effect of not applying carbon price support charges to fuels used for Combined Heat and Power (CHP) is offset by the decision to remove the associated Climate Change Levy (CCL) exemption certificates, he said.

Climate Change Levy

Plants must generate at least 2MW of electricity before they become liable for the carbon price support rates of the Climate Change Levy (CCL).

CCL rates themselves will increase in line with inflation from 1 April 2013.

As announced in 2011's Budget, Climate Change Agreements (CCAs) will be extended to 2023, and as the Chancellor said in his Autumn Statement 2011, the Climate Change Levy discount on electricity for CCA participants available from 1 April 2013 will be increased to 90% to support energy-intensive industries.

The removal of exemption certificates to the Levy will bring in £110m in 2013-14, rising to £165m in 2016-17. This will go some way to paying for the carbon price floor and support for combined heat and power, which is estimated to cost £45m in 2013-14, rising to £145m in 2016-17.

Oil and gas

The Chancellor made significant announcements to support expansion of fossil fuels, especially gas, in a move that, together with Ed Davey's announcement of support for gas-fired generation earlier this week, is more than likely to stimulate a new building programme of gas-fired plants.

“Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years,” he said, adding that there will be a new strategy for gas generation published by DECC in the Autumn.

The statement was welcomed by Energy Networks Association (ENA), which represents the transmission and distribution network operators for gas and electricity in the UK and Ireland.

It claimed credit in a press release for advising him to do so, in what it called "our" Redpoint report, published a year ago, a claim which throws doubt on the impartiality of this key consultation document.

Mr. Osborne announced a programme of support to make it more economical to exploit small oil fields; action to open new fields to the West of Shetland; and promised primary legislation to permit measures to support investment in brown-fields.

The package was decried by environmentalists and welcomed by the industry, with Richard Forrest, partner in the oil & gas practice of global management consultancy A.T. Kearney, saying it "will entice oil and gas players who have investment options in many basins around the world".

Kearney felt that the introduction of a new £3 billion field allowance for particularly deep fields with sizeable reserves targeted at the West of Shetland "will help drive innovation and capability in the UK oil and gas service sector and have the knock-on effect of supporting competitiveness beyond the UK."

But Charlie Kronick, senior energy advisor for Greenpeace, said: “George Osborne hasn’t learned any of the lessons after the disaster in the Gulf of Mexico. Any oil spill in the west of Scotland would wreak untold devastation on some of the UK’s most fragile habitat and the local economy."

Mark Kenber, CEO of The Climate Group, said this move ridiculed David Cameron's pledge to create the “greenest government ever”. "To drive forward clean technologies we need a government that is willing to invest in low-carbon technologies while displaying strong and inspiring leadership," he said.

To secure billions of pounds of additional investment in the UK Continental Shelf, the Government will introduce a contractual approach to offer long term certainty on decommissioning old rigs.

Kronick said this would mean that "UK taxpayers will continue to pick up the tab for cleaning up the oil companies’ mess," observing that the UK’s tax regime for the oil industry is already among the lowest in the world.

Renewable energy

In a speech notable for few mentions of renewables other than referring to support measures already in the Government's workstream and the updated national infrastructure plan, the Chancellor did affirm that “renewable energy will play a crucial part in Britain’s energy mix – but I will always be alert to the costs we are asking families and businesses to bear.

"Environmentally sustainable has to be fiscally sustainable too.”

Gaynor Hartnell, head of the Renewable Energy Association, welcomed the “noticeably more positive tone” than in the Autumn Statement on renewables, but observed that the government’s own advisers had found that ″volatile gas prices, not renewable energy costs, were responsible for recent soaring electricity bills″.

Enhanced capital allowances

Expenditure on solar panels will be designated as special rate expenditure for capital allowances purposes from next month under the Finance Bill 2012.

While plant eligible for Feed-in Tariff support is ineligible for tax-free enhanced capital allowances, other designated energy-saving and water-efficient technologies do qualify, and the ECA list of eligible technologies will be updated during this summer.

The Government is also extending the 100 per cent FYA (first-year allowance) for businesses purchasing low emissions cars until 31 March 2015, a move welcomed by Mark Kenber, CEO of The Climate Group.

"The Climate Group’s EV20 Plugged-In Fleets report which was published in February 2012 highlighted that electric vehicles (EVs) can be commercially viable in business fleets," he said.

Less cash for DECC and Defra

The Department for Energy and Climate Change will see its Programme and Administration budget cut in real terms after 2012-13; currently it is £1.1 billion, which will rise to £1.4 billion for the next two years before falling to just £1 billion in the last year of this Parliament.

Defra's Programme and Administration budget will also fall, from £2 billion now to £1.8 billion by 2016-17, which will be around an 6% cut with inflation taken into account.

DECC's capital budget will almost double, however, from £1.4 billion to £2.7 billion by 2016-17, reflecting the need to support investment in more energy infrastructure, and a trend that has been ongoing for several years.

This support was broadly welcomed, but the ESA's Matthew Farrow said the waste industry "would have liked to see specific ‘green infrastructure allowances’ to incentivise investment in the sector, as the loss of industrial building allowances has made some potential waste management investment less economically viable".

By contrast, Defra's capital budget will fall in real terms, remaining at £0.4 billion.


The Chancellor announced plans and support for more roads, rail investment and even potential enlargement of Gatwick Airport.

Greenpeace said this "flies in the face of the Coalition agreement that specifically ruled it out".

Amongst the announcements on rail was support for Network Rail to invest a further £130 million to improve transport links between cities in the North of England which will enable the number of fast trains to double.

Vehicle excise duty (VED) rates will increase in line with the Retail Price Index from April 2012 but VED rates for heavy goods vehicles will be frozen.

For fleets and company cars there are changes to the capital allowance regime for business cars to strengthen the incentive to purchase more fuel-efficient cars.


Alongside the revolutionary Red Tape Challenge changes to environmental legislation announced by Defra this week, Mr. Osborne said the Government is to set up a Major Infrastructure and Environment Unit that will at an early stage look at the impact of nationally significant infrastructure projects on potential Habitats Directive issues.

The appointment of Dieter Helm as Chair of the new UK Natural Capital Committee was announced by the Chancellor. This body provides advice on the state of English Natural Capital to the Economic Affairs Cabinet Committee (chaired by the Chancellor of the Exchequer).

To coincide with this, the Global Legislators Organisation (GLOBE) released a new Rio+20 draft of its original Natural Capital Action Plan which helped shape the creation of the UK Natural Capital Committee last year by the Government, and which will form part of the central agenda of the Rio+20 meetings and World Legislators Summit meeting this June that GLOBE is helping organise with the UN.

Landfill tax

The standard rate of landfill tax will increase by £8 per tonne to £72 per tonne from 1 April 2013. The lower rate of landfill tax will remain frozen at £2.50 per tonne in 2013–14.

The value of the landfill communities fund for 2012–13 will remain unchanged at £78.1 million. As a result, the cap on contributions by landfill operators will be reduced to 5.6%.

Packaging recycling targets

These will increase annually by 3% for aluminium, 5% for plastic and 1% for steel from 2013 to 2017. Glass recycling targets will be split by end use.

Matthew Farrow, the Environmental Services Association’s Director of Policy said this was right. “The higher targets and five year timescale will give confidence to investors in recycling and reprocessing facilities."

He added, "We also support the splitting of glass PRNs by end use, to reflect the environmental benefits of glass recyclate going to remelt".

Aggregates levy

The Government is delaying the planned increase in the aggregates levy rate from £2.00 to £2.10 per tonne until 1 April 2013 to avoid putting additional pressure on the aggregates industry in Northern Ireland.

That's it. The Chancellor barely mentioned or ignored the Contract for Difference Feed-in Tariff, the Renewable Heat Incentive, the Green Deal, Electricity Market Reform policies, UK Green Investments (UKGI), changes to the Renewables Obligation, or the Energy Efficiency Deployment Office.

But perhaps that is just as well.

A much more practical kind of carbon capture and storage - that makes jet fuel...

LanzaTech chief executive Jennifer Holmgren and Richard Branson
LanzaTech chief executive Jennifer Holmgren and Richard Branson with some of the jet fuel.

National Grid and partners have announced a potential new CCS project for Scotland. But a different form of CCS is soon to be used by Virgin Atlantic to create aviation fuel.

Petrofac, the oil services company, American developer Summit Power, together with the National Grid, have announced they are joining the £1bn government competition to build a carbon capture and storage (CCS) project in Grangemouth, Scotland. The project is dependent on securing financial backing from the EU as part of the U.K.'s next funding round for CCS, in which case it could be up and running in 2018.

From carbon capture to aviation fuel

But a far more interesting form of carbon capture and storage technology promises to be up and running much earlier, and capture carbon more cheaply and effectively from industrial processes, and turn the result into aviation fuel, amongst other things.

The revolutionary fuel production process recycles waste gases that would otherwise be burnt into the atmosphere as carbon dioxide.

Virgin Atlantic has signed a deal with its developer, New Zealand company LanzaTech, which was this week named as one of 10 New Energy Pioneers at the fifth annual Bloomberg New Energy Finance Summit in New York.

Several of these winning companies are in the area of smart grid or energy efficiency, while others are in electric vehicles and generating entity from treating wastewater. They were all selected because of their “innovative, proven technologies, robust business models and the ability to demonstrate traction and global scale".

LanzaTech won for its success in using bacteria that absorb and process carbon dioxide and other waste, polluting gases from fossil fuel combustion, and turning the result into biofuel and useful chemicals.

The company has won a string of awards; just last month it was named one of the 50 most innovative companies in the world by the editors of Technology Review Magazine.

LanzaTech chief executive Jennifer Holmgren said the start-up was honoured to get the award, which recognises its technology as a game changer. "By beneficially recycling waste gases, LanzaTech is able to address the three pillars of sustainability by reducing overall carbon emissions and increasing the supply of fuels and chemicals without competing for food or land resources," Dr. Holmgren said.

Its first commercial project is installing its technology on a steel mill in South Auckland, which will be operational as soon as next year.

But the company also has development projects in Shanghai, China, and India (a deal with Mumbai-based renewable energy investment company Concord Enviro Systems), which are expected to be completed and generating income streams in the same timeframe by selling the fuel product to Virgin Atlantic.

"This partnership to produce a next generation, low-carbon aviation fuel is a major step towards radically reducing our carbon footprint, and we are excited about the savings that this technology could help us achieve," Richard Branson says.

"We were the first commercial airline to test a biofuel flight and we continue to lead the airline industry as the pioneer of sustainable aviation."

LanzaTech is 51% owned by Khosla Ventures of Silicon Valley in California, and was founded by Vinod Khosla, the India-born co-founder of Sun Microsystems.

The fermentation technology has been proven using a 100,000 gallon-a-year demonstration plant. At the heart of it is a patented microbe that uses gas feeds as its sole source of carbon and energy for fuel and chemical production.

The bugs can feed off a broad range of industrial offgases, whether they contain hydrogen or not, such as from steel mills, municipal waste, organic industrial waste, syngas and methane, and converts them into ethanol.

Because it is much more straightforward to install, it could be implemented relatively quickly on a wide scale throughout all these industries. If so, it would slash global carbon emissions and provide a sustainable source of fuel in a much shorter timescale than the complex one being envisaged for energy generation plants.

LanzaTech is also working with French company Global Bioenergies to produce the biofuel-precursor chemical isobutylene from waste carbon monoxide, which currently has to be expensively scrubbed from many industrial processes as it is toxic.

If successful, this will be a revolutionary process, because nowhere in nature is isobutylene made using bacteria. The chemical is also used to make kerosene: jet fuel.

Dr. Holmgren said “This work is a natural extension of the Global Biotechnologies and LanzaTech technology platforms.

"LanzaTech’s strategy is to diversify its product portfolio beyond ethanol to key chemical intermediates and drop in aviation fuels through developing key technology partnerships.

"Global Biotechnologies’ technology could contribute to this strategy as isobutene can be directly converted to polymers and jet fuel relevant C-12 molecules.”

The process is not unique. Many companies throughout the world are also competing, whether small fry innovators with large partners: BP and Verenium, OPX Bio and Dow; or two large companies together: BP and Dupont, and Rentech and ClearFuels.

The Petrofac project

The CCS initiative in Scotland is called the Caledonia Clean Energy Project. Under it, a new coal-fired power station would be constructed in the Firth of Forth, fitted with carbon capture technology that would carry 90% of the carbon emissions from combusting the coal via a pipeline into the North Sea.

"The project site has been selected to take advantage of synergies with other facilities for industrial gas supply and to support CO2 capture," said Summit Power in a statement.

"The location provides the benefit of being close to the UK North Sea for both CO2 storage and, later, enhanced oil recovery opportunities, and enables the re-use of existing pipelines."

If it gets the go-ahead, securing the carbon dioxide gas under the seabed would be the responsibility of Petrofac's subsidiary company CO2DeepStore.

Petrofac has an office in Aberdeen, and CO2Deepstore is 50% partner in the Storage Joint Venture at Goldeneye, in the Outer Moray Firth, for CO2 storage from SSE’s Peterhead gas fired power station.

As with the Don Valley Power Project, the gas would be used to pump out oil deposits from the bedrock in the St Fergus oilfield, in a process known as enhanced oil recovery.

Dr Sam Gardner, from WWF Scotland, said that this aspect of the proposal cancelled out its carbon-capturing purpose; therefore the project would only attract their support if this element were to be removed.

Aedán Smith, RSPB Scotland's head of planning, also called enhanced oil recovery “unsustainable" in this context.

The project builds on the experience of a similar demonstration one being developed in Texas by Summit Power with the help of a $450 million grant from the US Department of Energy, which will pump oil from local fields.

Monday, March 19, 2012

UK Government's green record comes under worst criticism yet

Tory anti-wind power propaganda
With friends like this, do the LibDems need enemies? Tory Aardvark campaign material.

Coalition Government claims to be the “greenest government ever" have been severely tarnished from five directions following developments over the weekend.

According to a YouGov survey, just 2% of the British population believe this claim, which will be further undermined by revelations in the Guardian on Saturday that restrictions on environmental pollution are about to be removed under the Government's “red tape challenge".

Furthermore, last Friday, Energy and Climate Change Secretary Ed Davey revised the Emissions Performance Standard requirements for a new generation of gas-fired electricity generating plants, which Greenpeace has calculated will lead to Britain missing its climate change targets.

This morning the Prime Minister also signalled his government would support new airport expansion in the South East, and heavily hinted Gatwick would be the focus of these plans.

The coalition agreement explicitly says: “We will refuse permission for additional runways at Gatwick and Stansted.”

But the Prime Minister said this morning: “I'm not blind to the need to increase airport capacity, particularly in the south-east. We are acting now to make the best use of existing capacity...... Gatwick is emerging as a business airport for London, under a new owner competing with Heathrow.”

Finally, the National Audit Office (NAO) has criticised the way in which the competition for the first UK demonstration carbon capture and storage project was run, saying valuable years have been lost in developing this new technology.

Not the greenest Government

On 27 May 2010, Secretaries of State Chris Huhne and Caroline Spelman repeated the new coalition Government’s pledge to be the greenest in UK history and outlined their legislative programme for the first term of government.

Chris Huhne said, "Making this Government the greenest not merely an aspiration; it is essential. The actions of this Government in this Parliament will define our ability to combat climate change in the decades to come.

“We are developing an integrated strategy across the public, private and third sectors, to tackle the loss of biodiversity, address the way that we use resources, adapt to climate change and grow a greener economy that provides the clean, green jobs and industries of the future."

Twenty two months later, where are we?

A YouGov poll, commissioned by Greenpeace, has found that only 2% of voters asked believe that the government is the “greenest government ever", with the majority, 53%, believing that it is “about average".

10% believe it is “greener than most other governments have been", with 9% believing it is “less green" and 7% believing it is the “least green". 18% didn't know.

The votes were split pretty equally by age and gender, but more Tories believe the claim (3%) than Labour (1%) with no LibDems agreeing with the statement.

People were asked whether they thought that current safeguards to protect Britain's wildlife and countryside were too strong, too weak, or about right.

Just 4% thought they were too strong, with 40% thinking they were too weak. 37% thought they were about right and 19% didn't know. Again, age and gender did not have a strong effect on the results, but voting intention did. Nearly half the number of Labour and LibDem voters thought that currently there was too little protection, whereas just 28% of Conservative voters did. 54% of Tories thought they were about right.

Red tape challenge

This being the case, the question of why the Government is slashing environmental protection for the countryside is being asked following revelations in the Guardian over the weekend that the Government will soon announce that 174 environmental regulations are to be relaxed.

These include laws concerning the dumping of asbestos, preventing the spread of invasive species, the protection of wildlife and common lands, curtailing noise nuisance, industrial air pollution and animal traps.

Ministers are expected to claim that the simplification of this legislation will save business £1 billion, yet apparently neither the Environment Secretary, Caroline Spelman, nor any other environment minister attended the ‘Star Chamber’ conducted by Cabinet Office Minister Oliver Letwin who is leading the “red tape challenge".

97% of the many thousands of public responses on the red tape challenge website asked for stronger protection or no change in the rules.

"The brazenness with which the government has sought to undermine the very principles of environmental protection is shocking enough," said Green Party MP Caroline Lucas. "But it's also astonishing that ministers have been so willing to waste taxpayers' money on such an ideologically driven vanity project."

A spokesperson for Defra merely said that “some of the rules we ask businesses to follow are either too complicated, ineffective or just obsolete".

The EU Habitats Directive, which protects rare and threatened wildlife, has been targeted by Osborne and will be "liberalised", according to the document. Other targets include regulations about:
  • persistent organic pollutants
  • cleaning up contaminated land, because this is a “burden for the housing industry"
  • development of common land
  • requirements for local authorities to investigate complaints about noise, dust and smell
  • waste management at construction sites
  • safe disposal of electrical goods and batteries by manufacturers
  • recycling targets for larger UK businesses.
Any environmental damage not paid for by business will have to be borne by the taxpayer.

New gas plants

Thirdly, on Friday Ed Davey announced measures to be included in the forthcoming Electricity Market Reform legislation that he says are intended to provide more certainty to those investing in new gas-powered generation.

He wants to maintain the 450 grams per kilowatt-hour level of emissions from such plants until 2045, so that they do not have to be fitted with emission-reducing technology or made more efficient, and adjust the Capacity Market in such a way that ensures such plants are built.

Greenpeace immediately slammed this as “the Liberal Democrats’ most craven submission yet to George Osborne’s bonfire of environmental protection".

Its senior energy campaigner Joss Garman said, “by stripping away the simple requirement that our power stations need to become more efficient and less polluting, Clegg and Davey are undoing whatever good work their party has done on the environment since entering government".

They have calculated that the effect of this measure "would make it impossible for the UK to meet its long-term carbon emission reduction goals".

The move could even be illegal and subject to challenge in the courts, since to comply with the recommendations of the Committee on Climate Change, Greenpeace notes that the level of emissions from these plants would need to fall to 50g per kwh at 2030.

According to DECC’s October 2011 Updated Emissions Projections, an additional 4.9 gigawatts (GW) of new gas-fired electricity generation capacity is projected to come online by 2020, with 4.1GW due by 2016.

However, new consented gas projects already amount to 16.2GW, and National Grid and New Power data shows that all of these projects could be online before 2020.

Garman called this "a major change of course from the one followed by Chris Huhne," and said it was “just about the worst thing Ed Davey could have done in his first weeks in office.”

Ed Davey said: “This is all part of our commitment to transforming the market, providing long-term certainty to investors, increased competition, and the best deal possible for consumers.”

Carbon capture and storage

Finally, the National Audit Office has issued an investigation into the competition launched in 2007 by the Department for Business, Enterprise and Regulatory Reform designed to stimulate innovation in carbon capture and storage and put the UK at the forefront of global attempts to develop this novel technology.

It was cancelled four years later by the Department of Energy and Climate Change on the grounds of protecting value for money and because the project could not be funded within the £1 billion budget agreed at the 2010 Spending Review.

The report concludes that it was launched with “insufficient planning and recognition of the commercial risks".

However, it does say that some good came of it: the results of engineering and design studies completed by bidders, upon which the Government spent £40 million (63 per cent of the £64 million it spent in total on the competition), may help to reduce the costs of future carbon capture and storage projects.

But during the competition, "DECC's decisions to continue were not informed by detailed consideration of the probability of reaching acceptable contract terms and the time lost should the competition not succeed.

"When a capital budget was decided in October 2010, there was no agreement on government funding for operational costs," it observes.

Amyas Morse, head of the National Audit Office, said: "Taking calculated risks is perfectly acceptable if those risks are managed effectively; but in this case DECC, and its predecessor, took too long to get to grips with the significant technical, commercial and regulatory risks involved.

"Four years down the road, commercial scale carbon capture and storage technology has still to be developed.

"The Department must learn the lessons of the failure of this project if further time is not to be lost, and value for money achieved on future projects."

Carbon capture and storage is a three-part process that involves capturing the carbon dioxide produced from burning fossil fuels, transporting it to a storage site, and permanently storing it under pressure, usually underground.

The individual elements of the technology exist but have yet to be linked and operated together at a commercial scale power station.

Friday, March 16, 2012

Sir Branson and fellow entrepreneurs ask Cameron to back renewables

Sir Richard Branson is one of 102 top business signatories of an open letter to David Cameron urging him to back wind and other renewable forms of power generation.

“March’s budget provides one of the biggest opportunities to tackle climate change in the UK," the Virgin tycoon says. “We must ensure it encourages investment rather than creates uncertainty and delays further serious investment in the renewable sector. As a country we need to be better prepared to deal with rising energy prices.”

The so-called ‘102 letter’ is conceived partly as a response to the actions of 101 backbenchers who last month wrote to the Prime Minister attacking wind power, and a call to the Treasury to re-establish a stable investment platform for renewable energy as a driver of the recovery out of the recession.

It is published on the website of the Entrepreneurs' Organisation (EO), the global network of more than 7,500 business owners in 38 countries.

“Cutting support for green energy is a false economy," comments Dale Vince, Founder and CEO of Ecotricity, one of Britain's most successful new energy companies trying to muscle in on the territory controlled by the Big Six.

His angle is energy security. “Britain needs to become energy independent once more, and with the North Sea all but depleted of fossil fuels we need to look to other forms of indigenous energy. We have them in abundance, in the wind the sun and the sea, enough to power our country many times over.

“While Britain remains dependent on global energy markets, our bills can only go one way: upwards."

His analysis is that the level of current support for green energy sources is relatively small in comparison to that for oil and gas.

In the last 12 months roughly £30 of our household energy bills has been spent on green energy support. Of this, the Renewables Obligation (RO) added just £15.15 to the annual energy bill of the United Kingdom’s 26.3 million households, with onshore wind power adding only £4.68, according to Ofgem's recently published RO annual report for 2010/11 and Ecotricity's analysis.

The RO is the main support mechanism for encouraging the growth of renewable energy in the UK.

Meanwhile, the rising cost of imported gas added around £120 to energy bills last year, according to Ofgem's Electricity and Gas Supply Market Report.

"We need to reverse those proportions; it's an incredible false economy to throw money at energy market speculators while penny pinching over the one thing we can do to solve the problem long term: make our own energy,” concludes Mr Vince.

The letter says that “as entrepreneurs, investors, economists, scientists, engineers, energy providers, community builders and Members of Parliaments, we are increasingly concerned about the lack of clarity around the future of government support for land-based renewables, such as solar, wind and biogas."

Decentralised energy

They call for a “decentralised energy market" as a means of making the costs of upgrading the U.K.'s “antiquated infrastructure and transmission losses" more efficiently, Claiming it will “deliver savings for taxpayers and provide frustrated investors with new opportunities".

It wants the Government to guarantee “the broadest possible ownership of the U.K.'s next generation of energy infrastructure", perhaps copying the situation in Germany, where over half of all energy supply is owned by individuals and communities, and which, they say, has “delivered a 25% cost reduction".

The letter, also signed by financier Ben Goldsmith, calls on the new National Planning Policy Framework to “recognise the huge value of this approach", and for planning inspectors to take into account “our collective needs, both local and national", in building our future low carbon economy.

"In wind alone, the UK has more than 40% of Europe's renewable energy resources – enough to power up our economy three to four times over, generate exports, and provide the tools for communities and entrepreneurs to do their job," they write.

Juliet Davenport, the CEO of Good Energy, another new entrant into the energy market, calls for “a more inclusive approach to the way we invest in our energy infrastructure" to make it “a vehicle for both economic and social investment in communities, towns and regions across the UK”.

“If there is no stable platform for investment in renewables, we cannot expect to generate the backing or scale of innovation needed to make a sustainable difference," adds Howard Johns, Chair of the Solar Trade Association.

The letter follows one from former directors of Friends of the Earth sent on Tuesday, slamming Britain's support for nuclear power, owned by foreign companies.

Mr Cameron is not short of advice: authors and campaigners George Monbiot, Stephen Tindale, Fred Pearce, Michael Hanlon and Mark Lynas have also written to him this week in support of nuclear power, which they claim cannot be ignored.

They point out that Germany and Japan, in their attempts to do without nuclear power, are increasing their carbon emissions.

However, Jonathan Porritt and his colleagues do not call for the closing of nuclear power stations overnight in Britain; there is no need to substitute their current generation capacity with coal or gas.

Lynas and co. also claim that nuclear power is cheaper; at issue is whether cost estimates given for building new nuclear power stations and accounting for their decommissioning and the care of radioactive waste are verifiable and accurate.

The Chancellor will be addressing some of these issues on Tuesday; amongst his policy tools for supporting all low carbon forms of energy is the proposed feed-in tariffs with contracts for difference, as set out in the Government's Electricity Market Reform White Paper.

Investors will also be listening for any announcements concerning the Green Investment Bank.

Wylfa nuclear newbuild favoured by Welsh Government; EDF abandons Heysham

Cardiff has announced that it expects to power Wales' future with a diverse range of low carbon technologies, including nuclear power, just as news emerges that EDF has cancelled plans for a new nuclear power station at Heysham, Lancashire.

The French company has annulled an agreement with the National Grid to set up any new connection to the grid from Heysham; all its plans for new stations are now focused on their sites at Sizewell and Hinkley Point.

Meanwhile, Wales expects to deploy new nuclear power at Wylfa on Anglesey as part of its transition to a low carbon economy, according to its new energy strategy, Energy Wales published yesterday.

This key policy document sees gas as the key transitional fuel because greenhouse gas emissions from it are "less than that of coal subject to the method of extraction". In the long term, it foresees the addition of carbon capture and storage to gas plants.

The document focuses almost exclusively on electricity, and to a lesser extent waste, almost neglecting the areas of heat and transport. It does share the UK Government's opinion that more electricity will be used in the future for transport and heating.

Its most controversial aspect is its support for nuclear power, the first time that the Welsh Government has been so unequivocal on this point.

Nuclear Wales

Energy Wales says the Cardiff Government supports the development of a new nuclear power station on Anglesey, which is being taken forward by Horizon Nuclear Power, a joint venture between E.ON UK and RWE npower.

The document uncritically repeats Horizon's claims that building a new nuclear power station at Wylfa B would "create around 800 permanent jobs and up to 5,000 during construction".

However, Horizon has not yet appointed the contractor to build a reactor on the site.

Both Areva and Westinghouse are in the running for this job. Westinghouse has warned that if Areva wins the contract it may call for an investigation under competition law because it would mean that Areva would secure the market monopoly, being already selected to build reactors for EDF Energy.

In addition, Westinghouse, owned by Toshiba of Japan, claims this would have a detrimental effect on jobs in Wales.

"It will have a permanent and significantly negative impact on the UK nuclear industry, jobs, manufacturing skills, supply chains and SMEs. Westinghouse have pledged to 'buy where they build' and source 70% UK content, Areva have existing supply chains in France and their UK commitment would be significantly less," says a legal document prepared on its behalf.

“There are undoubtedly risks associated with nuclear power but the risks posed by climate change are now so serious that we cannot dispense with a key proven low-carbon technology,” says the Energy Wales report.

This commitment was immediately criticised by Friends of the Earth Cymru, which said that it was the first time the Welsh Government had supported nuclear power in full.

"To believe that nuclear power can help build a prosperous Wales is misguided – renewable energy provides far more jobs than nuclear power per unit of energy generated,” said Gareth Clubb, its director.

Anglesey was the site over the weekend of a protest to mark the first anniversary of the Fukushima disaster in Japan by a group called People Against Wylfa B (Pawb).

But the energy document and support for nuclear power has won support from Plaid Cymru leadership contender Dafydd Ellis-Thomas and William Powell, the Liberal Democrat spokesman for Environment and Sustainable Development, who said the party accepted that non-renewables would continue to play an important role in Wales’ energy mix.

The international engineering and project management company AMEC has today been appointed by the Isle of Anglesey County Council as chief consultant for the Energy Island Programme, in a four-year contract with an unspecified value.

It will provide the Council with capacity and expertise in areas such as planning policy and development management, environmental impact assessment, consultation, Infrastructure Planning Commission (IPC) process and procedure as well as socio-economic regeneration aspects. The appointment recognises AMEC’s environmental, planning and engineering strengths in renewables and in the nuclear sector.

It is anticipated the programme could contribute nearly £2.5 billion to Anglesey and the North Wales economy over the next 15 years.

Renewables and energy efficiency

Energy Wales also sees a role for every other kind of renewable energy including the introduction of renewable bio-methane into the gas supply from anaerobic digestion, as well as for greater end use and conversion efficiency in space and water heating to reduce overall demand.

But little mention is made of Wales' vast resources of forestry timber for biomass generation of heat in the context of community heat and power generation.

The policy document vows to "relentlessly pursue energy efficiency so that we do more with less", but also exploit the principality's huge resources for marine and offshore wind power.

The Welsh Government is developing a Wales Infrastructure Investment Plan in which it will set out the strategic priorities for investment of what it sees as around £50 billion-worth of necessary low carbon electricity projects by 2025.

It expresses frustration that whereas some aspects of its legislature are devolved, such as planning, responsibility for large-scale energy development (above 50MW onshore and 1MW offshore) as well as the electricity transmission network that connects them, lies not with Wales but the UK Government.

It has commissioned Hyder to review current energy consenting systems, and its report is expected in the summer. Any necessary legislative changes will be fed into the Planning White Paper and subsequent Planning Bill. In the meantime it will continue to press for greater devolution of energy consenting powers.

Gerry Jewson, the chief executive of onshore wind energy firm West Coast Energy, said that the report showed that the Government "has listened to the representations of all stakeholders in Wales’ renewable future and has a real understanding of the issues" and called on "Cardiff to deliver action, not just aspiration".

He said that "specific and unambiguous commitments to targets for renewable technologies will be essential to focus the minds of planners and developers alike and catalyse the industry otherwise this good intent could be lost."

Other assets

Wales holds several major assets which are essential to the entire UK economy, such as the two LNG terminals at Milford Haven which are linked by a controversial pipeline to England.

It also holds deep sea ports which are potentially useful for establishing offshore energy infrastructure.

Although Energy Wales says that we "believe the development of the grid in Wales can and should be carried out in a way that is sensitive to its impact on our natural environment," no direct reference is made to the prospect of burying grid connection cables from onshore wind farms, a highly sensitive subject in Wales.

While the administration is opening its doors to developers to take advantage of a skilled workforce already with a tradition of the steel and coal industry, it expects developers to return the benefits of the investment to communities in Wales in the form of jobs, training and a share of the returns.

It sees a particular advantage in the fact that it can draw match funding from Brussels, such as through the European Regional Development Fund.

It points to its 'arbed' program and support the Anglesey Energy Island programme as examples of successful pilot projects, and sees that nuclear power on Anglesey as well as marine, solar, biomass, hydro and others can all play a part.

Launching ‘Energy Wales: A Low Carbon Transition’, the First Minister Carwyn Jones, said “Last year the renewable and low carbon sectors supported 29,000 jobs in Wales.

"I want to see these figures increase and see Wales securing the highest possible number of the 250,000 additional jobs predicted for the energy sector in the UK in the coming years."

Although renewable energy supplies only a little over 5% of Wales' electricity, 62% of this comes from wind and solar with a further 25% coming from thermal renewable generation and 13% from hydro generation.

Existing windfarms have a capacity of 562 MW, which will more than double next year when Gwynt y Môr offshore windfarm comes onstream to join a further 263MW from onshore developments.

On energy efficiency, Wales already has a comprehensive supply-chain, from manufacturing to installation, within its boundaries.

Insulation measures and micro-generation technologies are made in Wales by businesses including Rockwool, Knauf, Kingspan, and Sharp.

Wednesday, March 14, 2012

“Perfect storm" has arrived for efforts to reduce carbon emissions

Drax power station

Efforts to reduce carbon emissions in the UK and across Europe are facing a combination of factors strongly hindering investment in low carbon power generation and energy efficiency and promoting the burning of coal.

Now who do you believe? Today, one British tabloid newspaper is reporting that the construction of gas power plants is “twice government predictions", while another is reporting the exact opposite.

The Guardian reports Friends of the Earth analysis of the latest Government figures, from October, saying that while about 5GW of new gas-fired power generation will be needed to supply the UK in the coming decades, “power stations with more than 3GW of capacity are already now under construction and nearly 10GW of plants have received planning permission. In addition, nearly 10GW of capacity is in the earlier stages of planning".

Meanwhile, the Financial Times is warning that with 11GW of mainly coal-fired generation due to close by 2015 under the EU’s Large Combustion Plant Directive, we are burning more coal because it is currently cheaper than gas.

What is the truth?

Actually, both, at different time scales. Either way, however, it's not good news for the climate.

Coal is too cheap

Gas is today trading at just over 58p per therm, yielding baseload power for delivery today from gas generation of £45.20 per megawatt-hour. This does not leave much room for profit when electricity is trading at 45.50 £/MWh, and this is why coal generation is now favoured over gas.

The FT says “coal plants have been pumping at more than 75 per cent capacity, compared with 25 per cent a year ago".

This is a continuation of the trend of burning more coal over the last two years which is helping to push up the U.K.'s carbon emissions.

Partly as a result of increased demand, UK Coal moved from an interim loss of £93.2 million to a profit of £22.1 million in the six months to last June, following losses totalling £270 million over the previous three years. (However, this has not stopped it from announcing plans today to close the U.K.'s biggest coal mine, Daw Hill, near Coventry, by early 2014 when current seams are exhausted.)

The demand is driving strong imports of U.S. and Colombian coal into Europe, and prices have fallen to just over $100 (£64) a tonne.

This figure is wildly different from that predicted by the government just six months ago: $124 (£80).

(In fact, the price of coal wasn't even the price that DECC's report said it was at the time it was published; yet these now wildly inaccurate figures are those on which the Government bases its energy policy.)

The low price for coal is also partly the reason why Drax announced last month that it was scrapping plans for a new biomass power station, calling for more support for biomass generation from the Renewables Obligation to counter an increase in its fuel costs; although it put these fuel costs at just £33.3 per megawatt-hour, significantly less than that for gas.

Too many carbon credits

None of this is helping the UK, or Europe, meet its greenhouse gas emission targets.

The problem is that with coal prices low, a recession on, and an over-abundance of EU Emissions Allowances resulting in a low price of carbon, there is insufficient disincentive to burn coal, let alone gas, and consequently even less incentive to build renewable energy generation, nuclear power stations or develop carbon capture and storage.

Hence the need for DECC's
announcement this week of a £20 million competition to develop Carbon Capture and Storage technology, in the hope that it will reduce the price of this still unproven technology.

This combination of factors is the perfect storm for attempts to reduce carbon emissions this decade.

Carbon prices fell by over half during 2011 and are now still trading for under €8.

Despite rumblings from Brussels, the Commission is dragging its feet on moves to set aside allowances in order to restrict demand and stimulate the price.

Instead, it seems to be hoping that by the end of the year, when airlines begin being required to purchase carbon-emission allowances as part of their role in the Emissions Trading Scheme, this will stimulate a price rise. But that is still nine months away.

According to carbon market analyst Steven Knell, from IHS CERA, the ETS in no longer the main policy tool for reducing emissions ″because the supply and price of allowances are fixed and predetermined. The market is poorly equipped to deal with disruptions in demand levels," he says.

“This, plus the financial crisis, the consequent fall in emissions, and the fragile nature of the recovery, added to recent price decline due to the expectation that policy risks will deprive the market of demand, mean that action to fix the problem is urgently required".

The oversupply means that only 6.8% of all EUAs are trading; a poor proportion. This amounts to 550 million tonnes, which is equivalent to all the emissions of the non-power generation industry members of the market in Europe, i.e., the high energy users like steel and concrete; or, to put it another way, all of the U.K.'s allowances.

“This yields a long position and indicates what the price will be like in 2020: that it will not change sufficiently to stimulate the demand required for investment in energy efficiency and renewable energy lesser-known carbon capture and storage or nuclear power," says Knell.

The supply of carbon-emission allowances needs to decline more aggressively and prices need to be higher.

The policy overlap in Europe needs addressing, he says. “The latest agreements give the possibility to set aside some EU Allowances to promote energy efficiency in the draft of the Energy Efficiency Directive, but the amount set aside would need to be substantial," he says.

“Strong medicine is needed."

“Strong medicine is needed," concludes Knell. He points to an increase in European ambition for emission reduction cuts from 20% to 30% by 2020, which, he says is achievable due to the recession's effects.

However, Poland has just vetoed this target at last Friday's meeting of environment ministers because of its own addiction to coal-fired electricity generation. This vote is not binding on a Commission decision however, and it remains to be seen what will happen.

In the meantime, only two strategies are available to individual governments, because they can't control the price of oil, and these are to tax carbon and support the carbon price.

Therefore, any measure that favours the energy-intensive industries by reducing the impact of carbon-penalising policies in next week's Budget from the Chancellor, George Osborne, will send precisely the wrong signals to the market.

The setting of the carbon price floor, and reform of the energy market are urgently required to favour carbon-reduction investment and weather this storm.

But contrary to the impression given by the Financial Times article, whatever happens the lights will stay on in Britain, because of the number of gas-fired power stations that have received planning permission; they may not be built just yet, but they will be built when coal and nuclear generation comes off-line in the future, to meet any demand not met by offshore wind.

But whether it's coal or gas, it locks in more UK carbon emissions than desirable for the next 20 or so years. Chancellor: are you paying attention?