A Critical View of Renewables Obligation and Renewable Energy in the UK
The Renewables Obligation is a Government mechanism to encourage investment in
renewable energy. It is central to the United Kingdom Government's policy to raise the amount of
renewable energy generated in the UK.
The renewables obligation (RO) has been guaranteed to be available for longer recently (UK pre-budget report).
The Alistair Darling MP has stated it is a Government wish which remains in place, despite the economic difficulties, not to let the present state of the economy impact badly on spending in the sector of renewable energy projects and environmental schemes generally.
"Action to achieve environmental goals remains a high priority, " he stated in his address to Parliament. Most importantly, the pre-budget report states the Renewables Obligation will be extended until "at least 2037" This is said to be in order to encourage rising investment in all renewable energy technology.
So, all UK investors can now plan with confidence for the future so that over the next decade the market will continue to deliver the renewable energy schemes, and contracts let, which will enable the UK to need to their 2020 target.
This means that electricity supply companies are still going to be encouraged to source continually increasing amounts of the electricity they sell (5.5% in 2005/06 rising to 15.4% by 2015/16) from renewable supplies.
The Renewables Obligation is the Department's main policy mechanism aimed at increasing the proportion of electricity that is generated from renewable sources throughout the UK. It is expected to make a significant contribution towards achievement of the current target of 12% contained in the Department's Strategic Energy Framework for the proportion of electricity that is generated from indigenous renewable sources by 2012.
The Renewables Obligation has however been criticised by some as an example of a green policy that has seriously unpleasant side effects and fails to achieve its objectives. The criticism is that the RO is a system which provides the same level of financial support for all eligible renewable projects. The Department adopted this approach as an easy opt -out, they say, to ensure that the most economic renewable energy projects are developed first, while minimising Government intervention in the market. However, the instrument is too blunt and important opportunities are in danger of being missed.
Generators get the same amount of ROC support for each MWh, no matter where in the UK they are sited. However, power generated closer to the main urban areas will incur far fewer distribution losses and hence costs to the nation to use it.
Larger wind farms may require to distribute their power to consumers further away and hence use grid lines running at 132kV, 275kV and 400kV, controlled by National Grid that are designed to take power over greater distances. These are going to need extending and strengthening.
Generators based in Scotland are therefore at an advantage, due to for example, their high winds. They can produce more power from the same investment due to those higher winds but should they still get the same price for their output?
The Renewables Obligation is said by its critics also to be failing the technologies that most need help. Designed to be technology neutral, it raises the most money for the lowest cost technologies.
So, the RO is a market led measure and will remain so. The Obligation is helping the UK renewable industry to take forward those renewable technologies that are close to becoming commercially competitive, but does nothing for innovation.
Renewable
energy policy is a primary part of
climate change policy. Climate change policy should aim to deliver curbs in emissions where they are easiest to cut, and where they require the least change in our life-styles and aspirations. The government would argue that the RO does this. However, this will coast us. Sir Nick Stern's estimate, in the Stern Report, of a cost of some 1 per cent of national income is modest, and is equivalent to foregoing half a year's British growth in terms of recent growth achieved.
