The past year has been the most challenging the renewables industry have faced. At the REA we have grown with the industry. Set up in 2001, we have seen the evolution of ‘alternative energy’ through to the mainstream. From a cottage industry spoken about in fantastical terms to standing on the precipice of delivering energy cheaper than fossil fuels. The economic direction is clear, last year saw the tipping point of renewables attracting more investment than traditional fuels worldwide.
The renewables industry should be a point of national pride, an area of real success, showcasing British ingenuity and innovation. We made ground-breaking strides forward in wind turbines during the eighties yet gave it away, for the past decade we have had the intellectual jump on the rest of the world in terms of marine energy and are in real danger of doing the same thing.
Solar is another area we have innovated. The drastic cost reductions seen in solar are only in small part due to cheaper panels, with EU tariff protection capping the cost of cheaper global prices. The British solar industry has driven down costs in the same way the British cycling team has revolutionised their sport, through the “aggregation of marginal gains”, a thousand minute improvements that are the difference between winning and losing. At a time when nuclear is going up in cost, coupled with doubts over deliverability, solar costs are still dropping and can be deployed quickly, cleanly and sustainably.
The cost of new renewables may now in fact be cheaper than those for new fossil fuel generation. I say in fact because there is no way of knowing. No new gas station has been commissioned in last 4 years, and the last plant to open in 2012 started construction in 2008.
The nearest viable new gas generation we have is Trafford, who quote they need £72MWhr to complete. The current wholesale price is around £35MWhr, leaving a £37 gap that needs to be plugged if the UK is going to get our new capacity from fossils. For reference, the last round of renewable contracts, solar and wind both came in at around £79. However, that was in February 2015 so the costs will have certainly have reduced further.
But in a twist of events, 2016 will see new gas subsidised, the Hinkley deal guaranteed at £92.50MWhr and even more bizarrely, diesel is receiving subsidy. Yet arguably the cheapest of all new generation options, wind and solar, will be blocked from having access to any market. So, government policy now subsidises diesel, but blocks the cleaner more cost effective choice.
How did we get here? It is undoubtedly exacerbated by low gas prices, making new capacity unattractive for energy companies, in addition to subsidies costing more due to the drop in the wholesale price. But whilst the low wholesale price is out of the government’s hands, the assault on renewables is not.
The industry has to move on from the last year and look to the new government agenda. The overall direction of renewables is clear and is an unstoppable global movement. Whilst we may have to spend a couple of envious years looking towards our partners in other countries longingly, wishing for their apparent ease, we need to get back to doing what we have already shown we are capable of, namely of innovation and finding UK solutions to UK problems.
Whilst the era of subsidies is coming to a early and abrupt end, renewables and new technologies can still find a use in some of the biggest policy problems we face in one of the oldest and most complex energy markets in the world.
Some of these problems are merely of an aging infrastructure. Last September, the then Chief Executive of the National Grid, Steve Holliday, summed up the shift in thinking that is going to have to happen.
“The idea of baseload power is already outdated. I think you should look at this the other way around. From a consumer’s point of view, baseload is what I am producing myself. The solar on my rooftop, my heat pump – that’s the baseload. Those are the electrons that are free at the margin. The point is: this is an industry that was based on meeting demand. An extraordinary amount of capital was tied up for an unusual set of circumstances: to ensure supply at any moment. This is now turned on its head. The future will be much more driven by availability of supply: by demand side response and management which will enable the market to balance price of supply and of demand. It’s how we balance these things that will determine the future shape of our business.”
This is a business case for renewables that doesn’t rely on targets or subsides, but of economic and consumer terms. There is a very real problem with the old way of thinking that is no longer suited to modern realities, and renewables offer part of that practical solution in a more decentralised grid.
The second is the financial environment we inherit. The old model of ‘big pieces of kit’ is increasingly unrealistic. In a nationalised system it would still perhaps be practicable to fund power generation in the billions for a single project, but as demonstrated with Hinkley Point C, it is proving hugely difficult to raise capital and underwrite the risk and is certainly added to the overall cost. Gas plant is also proving difficult, with policy uncertainty playing its part and the low wholesale price too. But large energy companies are also sitting on reduced reserves with little incentive to risk hundreds of millions in a new asset.
Smaller, easier to fund projects are looking much more attractive and can have much lower financing costs.
Thirdly, the inherent problem of renewables variability is soon to be turned into a positive when coupled with energy storage. With energy storage, the instant dispatchability is in stark contrast to the unresponsive and inflexible nature of baseload. For many, energy storage is a green pipedream still decades away. This is now demonstrably wrong, with companies around the world already operating energy storage plants. Even better, they’re operating energy storage projects without subsidy. California is undoubtedly leading the way but the UK is looking to catch up quickly. Kilroot in Northern Ireland is a 10MW plant recently opened, with plans to extend to 100MW. National Grid announced their tender for 200MW of enhanced frequency response capacity its resulted in 68 project submissions totalling 1.3 GW. Energy storage is already viable, and we are going to see a lot more of it.
The energy sector is going to have a revolution in the coming years. Smart businesses and markets have already woken up to that fact, now is the time for the UK government, and some in the energy market clinging to the old broken models, to do the same.
By James Court, Head of Policy & External Affairs, REA
This article first appeared in the Guide to Clean Energy
Are the UK Governments Plans for the Energy Sector Smart?
The revolution in the energy sector marches on, wind turbines and solar panels are harnessing more renewable energy than ever before – so where is it all leading?
The UK government have recently announced plans to modernise the way we produce, store and use electricity. And, if realised, the plans could be just the thing to bring the energy sector in line with 21st century technology and ideologies.
Central to the plans is an initiative that will see smart meters installed in homes and businesses the length and breadth of the country – and their aim? To create an environment where electricity can be managed more efficiently.
The news has prompted some speculation about how energy suppliers will react and many are predicting a price war. This could benefit consumers of electricity and investors, many of whom may be looking to make a profit by trading energy company shares online using platforms such as Oanda – but the potential for good news doesn’t end there.
Introducing New Technology
The plan, titled Smart Systems and Flexibility is being rolled out in the hope that it will have a positive impact in three core areas.
- To offer consumers greater control by making smart meters available for all homes and businesses by 2020. Energy users will be able to monitor, control and record the amount of energy they use.
- Incentivise energy suppliers to change the manner in which they buy electricity, to offer more smart tariffs and more off-peak periods for energy consumption.
- Introduce new standards for electrical appliances – it is hoped that the new wave of appliances will recognise when electricity is at its cheapest and at its most expensive and respond accordingly.
How the Plans Will Affect Solar Energy
Around 7 million houses in the UK have solar panels and the government say that their plan will benefit them as they will be able to store electricity on batteries. The stored energy can then be used by the household and excess energy can be exported to the national grid – in this instance lower tariffs or even payment for the excess energy will bring down annual costs significantly.
The rate of return on energy exported to the national grid is currently between 6% and 10%, but there are many variables to take into account, such as, the cost of battery storage and light levels. Still, those with state-of-the-art solar electricity systems could end up with an annual profit after selling their excess energy.
The Internet of Things
Much of what the plans set out to achieve are linked to the now ubiquitous “internet of things” – where, for example, appliances and heating systems are connected to the internet in order to make them function more smartly.
Companies like Hive have already made great inroads into this type of technology, but the road that the government plans are heading down, will, potentially, go much further -blockchain technology looms and has already proved to be a game changer in the world of currency.
It has already been suggested that the peer to peer selling of energy and exporting it to the national grid may eventually be done using blockchain technology.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Don and Alex Tapscott, Blockchain Revolution (2016)
The upshot of the government’s plans for the revolution of the energy sector, is that technology will play an indelible role in making it more efficient, more flexible and ultimately more sustainable.
4 Case Studies on the Benefits of Solar Energy
Demand for solar energy is growing at a surprising rate. New figures from SolarPower Europe show that solar energy production has risen 50% since the summer of 2016.
However, many people are still skeptical of the benefits of solar energy.Does it actually make a significant reduction in our carbon footprint? Is it actually cost-effective for the company over the long-run?
A number of case studies have been conducted, which indicate solar energy can be enormously beneficial. Here are some of the most compelling studies on the subject.
1. Boulder Nissan
When you think of companies that leverage solar power, car dealerships probably aren’t the first ones that come to mind. However, Boulder Nissan is highly committed to promoting green energy. They worked with Independent Power Systems to setup a number of solar cells. Here were the results:
- Boulder Nissan has reduced coal generated electricity by 65%.
- They are on track to run on 100% renewable energy within the next 13 years.
- Boulder Nissan reduced CO2 emissions by 416,000 lbs. within the first year after installing their solar panels.
This is one of the most impressive solar energy case studies a small business has published in recent years. It shows that even small companies in rural communities can make a major difference by adapting solar energy.
2. Valley Electric Association
In 2015, the Valley Electric Association (VEA) created an 80-acre solar garden. Before retiring from the legislature, U.S. Senate Minority Leader Harry Reid praised the new project as a way to make the state more energy dependent and reduce our carbon footprint.
“This facility will provide its customers with the opportunity to purchase 100 percent of their electricity from clean energy produced in Nevada,” Reid told reporters with the Pahrump Valley Times. “That’s a step forward for the Silver State, but it also proves that utilities can work with customers to provide clean renewable energy that they demand.”
The solar energy that VEA produced was drastically higher than anyone would have predicted. SolarWorld estimates that the solar garden created 32,680,000 kwh every year, which was enough to power nearly 4,000 homes.
This was a major undertaking for a purple state, which may inspire their peers throughout the Midwest to develop solar gardens of their own. It will reduce dependency on the electric grid, which is a problem for many remote states in the central part of the country.
3. Las Vegas Casinos
A number of Las Vegas casinos have started investing in solar panels over the last couple of years. The Guardian reports that many of these casinos have cut costs considerably. Some of them are even selling the energy back to the grid.
“It’s no accident that we put the array on top of a conference center. This is good business for us,” Cindy Ortega, chief sustainability officer at MGM Resorts told Guardian reporters. “We are looking at leaving the power system, and one of the reasons for that is we can procure more renewable energy on the open market.”
There have been many benefits for casinos using solar energy. They are some of the most energy-intensive institutions in the world, so this has helped them become much more cost-effective. It also helps minimize disruptions to their customers learning online keno strategies in the event of any problems with the electric grid.
4. Boston College
Boston College has been committed to many green initiatives over the years. A group of researchers experimented with solar cells on different parts of the campus to see where they could produce the most electricity. They discovered that the best locationwas at St. Clement’sHall. The solar cells there dramatically. It would also reduce CO2 emissions by 521,702 lbs. a year and be enough to save 10,869 trees.
Boston College is exploring new ways to expand their usage of solar cells. They may be able to invest in more effective solar panels that can generate far more solar energy.
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