The implications for the UK market - Regensw
The implications for the UK market Rufus Ford Policy Manager Scottish and Southern Energy Sponsored by
energy made better
Feed-in Tariffs
Overview • Effect on energy mix and UK markets • SSE views on FiT as proposed • Remember: not just an energy policy. – Engaging consumers – Industrial policy?
Effect on UK energy mix • Expected to deliver 2% of final electricity demand (8TWh) in 2020 – 7% of renewable electricity (RES)
• Uptake is uncertain • Have to meet 15% renewable energy target and carbon budgets • Lots of policy interactions and possible levers to pull
Effect on UK Market – energy costs (1) • Microgeneration is expensive – £9.5 bn resource cost for £780 mn carbon saving Subsidy cost (£/MWh) 400 300 200 100 0
Effect on UK market – energy costs (2) • Installations switching from RO increase costs • Cost spread across all consumers • Cross subsidy due to under recovery of fixed costs • Affects investment in, and returns from, large scale renewables
Effect on UK market - microgeneration • Technology costs generally determined by global markets • Some cost reductions available from economies of scale • Over ambitious growth plans undermine cost reduction arguments • Seek to avoid dramatic swings in the market
Effect on CO2 emissions • Interaction with EU ETS • Comparison with other countries difficult as UK limited to < 5MW
SSE view on FiTs • Support FiT for small scale generators • Can be delivered by April 2010 if… – Operational challenges are overcome – Right balance is struck to deliver value for money and to keep costs to consumers down
Operational issues • Meters: ownership, governance codes, stranded assets (generation and export) • Value of exported electricity • Under recovery of fixed costs • Expected uptake uncertain • Registration systems • Fair levelisation process – suppliers must want FiT customers
Tariff levels, lifetimes, degression • No particular comments on tariff levels or lifetimes • Need to be mindful of cost to consumers – Difficult to predict uptake – Shorter lifetimes could reduce subsidy costs
• Degression rates seem high
Tariff bands • Clearly potential for gaming and incentives to undersize for installations close to tariff bands • Alternatives were available – Tiered tariffs – “Continuous variable tariff rate”
• Definition of capacity? E.g. wind turbines >500 kW electrically limited by connection agreement to 500 kW electrically limited by connection agreement to 50 kW can still register for RO
Interaction with RHI • Consumer should consider correct renewable solution for them based on individual circumstances and environmental considerations, not perverse incentives provided by tariffs • CHP • Difficult to assess due to timing of consultations
[email protected]
energy made better
Feed-in Tariffs
Overview • Effect on energy mix and UK markets • SSE views on FiT as proposed • Remember: not just an energy policy. – Engaging consumers – Industrial policy?
Effect on UK energy mix • Expected to deliver 2% of final electricity demand (8TWh) in 2020 – 7% of renewable electricity (RES)
• Uptake is uncertain • Have to meet 15% renewable energy target and carbon budgets • Lots of policy interactions and possible levers to pull
Effect on UK Market – energy costs (1) • Microgeneration is expensive – £9.5 bn resource cost for £780 mn carbon saving Subsidy cost (£/MWh) 400 300 200 100 0
Effect on UK market – energy costs (2) • Installations switching from RO increase costs • Cost spread across all consumers • Cross subsidy due to under recovery of fixed costs • Affects investment in, and returns from, large scale renewables
Effect on UK market - microgeneration • Technology costs generally determined by global markets • Some cost reductions available from economies of scale • Over ambitious growth plans undermine cost reduction arguments • Seek to avoid dramatic swings in the market
Effect on CO2 emissions • Interaction with EU ETS • Comparison with other countries difficult as UK limited to < 5MW
SSE view on FiTs • Support FiT for small scale generators • Can be delivered by April 2010 if… – Operational challenges are overcome – Right balance is struck to deliver value for money and to keep costs to consumers down
Operational issues • Meters: ownership, governance codes, stranded assets (generation and export) • Value of exported electricity • Under recovery of fixed costs • Expected uptake uncertain • Registration systems • Fair levelisation process – suppliers must want FiT customers
Tariff levels, lifetimes, degression • No particular comments on tariff levels or lifetimes • Need to be mindful of cost to consumers – Difficult to predict uptake – Shorter lifetimes could reduce subsidy costs
• Degression rates seem high
Tariff bands • Clearly potential for gaming and incentives to undersize for installations close to tariff bands • Alternatives were available – Tiered tariffs – “Continuous variable tariff rate”
• Definition of capacity? E.g. wind turbines >500 kW electrically limited by connection agreement to 500 kW electrically limited by connection agreement to 50 kW can still register for RO
Interaction with RHI • Consumer should consider correct renewable solution for them based on individual circumstances and environmental considerations, not perverse incentives provided by tariffs • CHP • Difficult to assess due to timing of consultations
[email protected]
