Week in Energy
Monday 28/05 – The UK and Canadian governments launch a joint £11mn challenge to explore opportunities presented by smart grids and storage. IRENA research finds companies in 75 countries actively sourced a total of 465TWh of renewable energy in 2017.
Tuesday 29/05 – BEIS set out its decisions on a range of issues relating to the non-domestic Renewable Heat Incentive. MPs launch an inquiry into carbon capture, usage and storage. Smart Energy GB research shows more than 8mn people in Britain are considering buying or leasing an electric vehicle in the next five years.
Wednesday 30/05 – First Minister Nicola Sturgeon addresses the Scottish Manufacturing Advisory Service, announcing a £4.9mn grant from Scottish Enterprise to build a subsea manufacturing campus in Scotland's north east that will support the global oil and gas industry.
Thursday 31/05 – National Grid announces that it wants a new procurement process for Black Start capabilities in place by the mid-2020s and wants to involve renewables and battery storage.
Friday 01/06 - A cross-party group of MPs urges the government to establish in law a net zero greenhouse gas emissions target in this Parliament. The Crown Estate reveals it is considering eight UK offshore windfarm extensions totalling 3GW.
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Policy 1 | BEIS takes decisions on reform of non-domestic RHI
The department issued decisions on Tuesday, 29 May on a wide range of changes to the non-domestic Renewable Heat Incentive (RHI) that it had originally consulted on in September 2017.
The non-domestic RHI is a government environmental programme that provides financial incentives to increase the uptake of renewable heat by businesses, the public sector and non-profit organisations. Eligible installations receive quarterly payments over 20 years based on the amount of heat generated. The scheme covers England, Scotland and Wales.
One of the original proposals in the consultation was to impose a limit on the annual heat production for any individual project. Concerns were raised that accreditation of a very large plant could lead to the premature triggering of the budget cap and the closure of both the non-domestic and domestic RHI schemes. This would be “detrimental to large parts of the renewable heat industry and could prevent the government from meeting its objectives”. The government therefore intends to proceed with the introduction of a heat production limit for very large plant at 250GWh/ year.
Concerns were raised in the consultation that some developers may be separately accrediting multiple biogas installations in order to have each installation accredited at the most advantageous tariff band. The government intends to take forward proposals to ensure that tariff bands are not abused by the installation of multiple smaller installations. Ofgem will also continue to scrutinise non-domestic RHI installations and may take enforcement action where it has cause to believe an installation has been configured solely to maximise RHI payments.
Another issue identified was that RHI participants may be able to claim RHI payments without holding the necessary environmental permits and complying with all relevant environmental legislation. Going forwards, applicants will be required to make a declaration on applications for accreditation or registration that the necessary environmental permits have either been granted or that no permits are required, and that the plant and its operation complies with all relevant environmental legislation. These provisions come into force on 1 October 2018.
Replacement plant will also now be permitted under the scheme and will be able to maintain their original RHI tariff for any capacity up to that of the original plant. However, any capacity beyond that of the original RHI accreditation will not be eligible to receive support payments.
Finally, Ofgem will impose a new rule that claims for estimated data may be submitted to Ofgem for no more than eight quarterly periodic data submissions within a 20-year tariff lifetime from the date amending regulations come into force.
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Policy 2 | Think tanks calls on UK to adopt net zero emissions target
Think tank, Bright Blue has published a report calling for the UK government to achieve deeper decarbonisation in future decades through the adoption of a new legal net zero emissions target.
In its report, Hotting Up: Strengthening the Climate Change Act ten years on, the liberal conservative think tank claims there is a strong scientific, technological, legal and political case for achieving such a target. Over the past decade, says Bright Blue, climate science has developed to such an extent that that it “highlights the need for urgent and deeper action to tackle climate change”. Decarbonisation – and associated technologies – are now cheaper in some sectors of the economy, the report adds, and international legal progress means that the UK’s climate targets are “less ambitious than the international goals to which it is committed”.
Addressing this, Bright Blue’s report focuses on four key questions: how successful has the Climate Change Act been since it was passed in 2008? Is there a strengthened case for deeper decarbonisation since the passing of the act? What is the public perception of climate change? And, what policies would strengthen the act and increase decarbonisation? The report also includes results of public polling on the impacts of, and policies on climate change. These find that 51% of UK adults are more concerned about climate change than they were ten years ago, and that 64% of UK adults agree that the UK should target zero carbon emissions in the next few decades.
Bright Blue argues that the case for increased decarbonisation is strong, driven by “climate change science, developments in clean technology, progress in the international legal framework, and… clear public support.” Accordingly, the report makes seven key recommendations to achieve this, including enshrining in law a net zero greenhouse gas emissions target that is in line with the 2015 Paris Agreement. This would involve the government amending the Climate Change Act’s long-term target so that it includes a “target date” for the UK to reach net zero greenhouse gases. Setting such a target, says Bright Blue, is essential for the UK to maintain its leading position on tackling climate change.
It is recommended that the government be allowed to meet a limited proportion of this target through the purchase of domestic and international carbon permits. This would allow the UK to compensate for the remaining emissions produced and would ensure “the target has credibility with public and business”. Other recommendations in the report are to include the aviation and shipping sectors in carbon budgets; changing carbon accounting rules so that they take account of “lifecycle emissions” from bioenergy; funding farmers and land owners to store carbon on their land through measures such as tree planting or peatland restoration; provide public funding for carbon capture and storage (CCS) projects; and establishing and leading an “international net zero alliance”.
Reaching a net zero target is essential in avoiding the impacts of climate change, and UK businesses are well positioned to be at the forefront of “providing new zero-carbon products and services to a huge global marketplace”. Bright Blue suggests that, on the tenth anniversary of the passing of the Climate Change Act, now is the time to “seize this prize”.
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Policy 3 | BEIS Committee launches inquiry into CCUS progress
The BEIS Committee has launched an inquiry on carbon capture, usage and storage (CCUS) and efforts to kickstart the technology in the UK.
Announced on Tuesday, 29 May, the inquiry will examine government commitments to deploy CCUS and whether it has a “Plan B” to meet climate targets if the desired cost reductions do not materialise. Following the significant reduction in the CCUS kickstart budget from £1bn to £100mn, the inquiry aims to test government ambition and to examine what policy is needed to implement large-scale CCUS.
The new inquiry follows previous committee work on CCUS commitments laid out in the Government’s Clean Growth Strategy, including an aim to “deploy CCUS at scale during the 2030s”. Furthermore, the government established a CCUS Cost Challenge Taskforce to explore options to deliver cost reductions, which will report in summer 2018.
Committee Chair, Rachel Reeves commented: “CCUS is expected to play an essential part in meeting the UK’s carbon budgets”. However, she added: “Clearer policy signals are needed if we are to create a market and commercialise this technology into the 2030s. If the government judge the costs are such that CCUS is not a viable option, then they must spell out an alternative if the UK is to meet its carbon emission reduction targets."
The deadline for submissions is 22 June.
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Policy 4 | Welsh government to miss own climate targets
The National Assembly for Wales said on Friday, 25 May, that the Welsh government is set to miss its own climate targets “by some margin”.
In its 2010 Climate Change Strategy, the government set a target of reducing greenhouse gas emissions in Wales by 3% year-on-year, with at least a 40% reduction by 2020. However, latest statistics show that, in 2015, Welsh emissions were 19% below 1990 levels.
In its first annual climate report, the Climate Change, Environment and Rural Affairs Committee was given three reasons for the failure: the EU Emissions Trading Scheme, the economic make-up of Wales and weather patterns. However, the committee concluded that these variables should have been considered when the target was set.
The Welsh government is now being advised on its new approach by the UK Committee on Climate Change, which recommends that it sets new, lower targets in the short term. These include a 27% reduction in emissions for 2020 on 1990 levels, a 45% reduction target for 2030 and a 67% reduction target by 2040. Furthermore, the report suggests a new target for the first carbon budget (2016- 2020), where emissions should be limited to an average of 23% below 1990 emissions.
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Industry 1 | IRENA finds corporates increasingly sourcing renewable energy
New research conducted by the International Renewable Energy Agency (IRENA) has found an increasing number of non-energy companies are actively procuring or investing in renewable energy.
Published on Thursday, 24 May the report found that, in 2017 companies in 75 countries actively sourced 465TWh of renewable electricity. This represents approximately 3.5% of total electricity demand in the commercial and industrial sector, and 18.5% of total renewable electricity demand in the commercial and industrial sector.
IRENA identified that almost half (47%) of the 2,410 companies analysed reported they are actively sourcing renewable electricity either through power purchase agreements (PPAs), utility green procurement programmes or unbundled energy attribute certificates (EACs). The report suggested that, of these companies, approximately 200 reported more than half of the electricity consumed was sourced from renewables, with 50 revealing that 100% of demand was achieved through these means.
In addition, the report revealed that 106 companies in the UK were actively sourcing renewable energy, ranking the UK third in terms of number of businesses sourcing from renewables, behind Japan with 193 companies and the US with 241. Companies sourcing renewable electricity come from diverse markets, with the highest shares of renewable electricity consumption found in the financial (24%) and IT (12%) sectors.
IRENA highlighted three main drivers of corporate sourcing: environmental and sustainability concerns, social responsibility and reputation management, and economic and financial objectives. However, to reach a global energy transformation that can deliver on the climate objectives set out in the Paris Agreement, the overall share of renewables in total electricity use would need to reach at least 85% by 2050, which equates to 19,000TWh for the commercial and industrial sector. In the current trajectory, corporate global demand for renewable electricity will grow to at least 3,800TWh by 2050 – only 20% of the required renewable electricity demand.
To achieve broader participation in the energy transition, IRENA detailed a series of policy recommendations including: support for an effective system for issuing and tracking energy attribute certificates, enabling companies to make credible renewable electricity use claims; ensuring an energy market structure that allows for direct contracting between companies and renewable energy developers; working with utilities or electricity suppliers to provide corporate renewable procurement options; and stimulating direct investments in corporate production of renewable electricity for self-consumption.
IRENA Director-General, Adnan Z. Amin said: “Renewable energy sourcing has become a mainstream pillar of business strategy in recent years. While environmental concerns initiated this growing trend, the strengthening business case and price stability offered by renewables can deliver a competitive advantage to corporations and support sustainable growth.”
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Industry 2 | Global EV numbers continue to climb: IEA
The International Energy Agency (IEA) has found that the number of electric vehicles (EVs) on roads worldwide rose to a record high of 3.1mn in 2017, but more research, policies and incentives are needed to drive further uptake.
Charging infrastructure is also keeping pace. In 2017, the number of private chargers at homes and workplaces was estimated at almost 3mn worldwide. In addition, there were about 430,000 publicly accessible chargers worldwide in 2017, a quarter of which were fast chargers.
The organisation’s analysis, published on Wednesday, 30 May, estimates there will be 125mn EVs on the road by 2030, based on existing and announced policies. That could rise to 220mn if policies become more ambitious to meet global climate goals and other sustainability targets.
So far, rising numbers of EVs on the road have had a “limited impact” on electricity demand. In 2017, estimated global electricity demand from all EVs was 54TWh. However, as electric vehicle uptake continues to rise their charging will increase electricity demand and impact transmission and distribution grids.
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Industry 3 | European grid operators predict secure outlook for summer
The European Network of Transmission System Operators for Electricity (ENTSO-E) issued its Summer Outlook report on Wednesday, 30 May, finding there is no expected risk to Europe’s security of supply even under severe conditions, with the estimated availability of generation, market-based demand side response and interconnection sufficient to meet demand.
Some curtailment may be needed in Ireland and in some bidding zones in the southern part of Italy in the case of an excess of intermittent generation and low demand. ENTSO-E noted that the level of hydro reserves in the Alpine region is equal or close to its lowest historical values, with hydro reserves in Spain and Norway higher but still below average.
The Summer Outlook also analyses the trend in evolution of the generation sources in Europe. In 2017, there was a continuous decommissioning of thermal power plants, which was partly compensated by newly commissioned renewable generation.
Looking back, winter 2017-18 was on average mild and windy without any notable adequacy issues, although ENTSO-E noted a frequency deviation episode due to power imbalances in Serbia, Macedonia and Montenegro.
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