Response to direct consultation questions

Transcription

1 Consultation on proposals for the levels of banded support under the Renewables Obligation for the period and the Renewables Obligation (Scotland) Order 2011 Response by RenewableUK RenewableUK is the leading trade association in the renewable power industry, with over 700 company members right across the value chain in the wind, wave and tidal stream sectors. The technologies that we represent will be providing the majority of the renewable electricity that will be required to meet our targets for 2020, and also bring the best opportunities in the renewables sector to establish thriving industries in the UK and Scotland, providing thousands of jobs. Due to the technology focus of RenewableUK, we will address those sections of the consultation that affect only wind, wave and tidal stream, or all technologies. Response to direct consultation questions Other than the exceptions as set out in this document, do you agree that the Scottish Government should amend its bands and legislation in line with the proposals for the rest of the UK? If not, please explain where Scotland should differ and why (providing evidence as necessary). In general RenewableUK finds the balance struck by the UK Government between the levels of support for specifically wind, wave and tidal stream power (and consequently the level of deployment) and the overall cost of the Renewables Obligation to be appropriate. However, we believe any further reduction in the multiples for either onshore or offshore wind would jeopardise delivery of the capacities required to meet our targets for In particular, reduction of the multiple for onshore wind below 0.9ROC/MWh would seriously impact the industry s ability to deliver capacity using the most costeffective renewable generating technology, requiring other, more expensive resources to be used instead. Proposal for a gradual reduction in the support for Offshore Wind The stepping down of support for offshore wind in the way proposed is consistent with a cost trajectory that results in costs of 100/MWh by This is a challenging objective and care needs to be taken that there is some certainty that projects are feasible given these reductions in support.

2 We leave it to those members with projects that could be delivered in 2015/16 or 2016/17 to provide the Scottish Government with evidence around such feasibility. Those projects will have to achieve final investment decision (FID) in the next 1-2 years and we note that the savings required will have to be found in a short time-frame. Our members have indicated that the most significant concern for offshore wind developers at present is the lack of visibility on support post A significant stepdown in support under the Contract for Differences that is intended to replace the RO could have a major disruptive impact on the sector and drive projects to attempt to get under the wire into the RO, leading to supply chain bottlenecks. Proposal to reduce Onshore Wind support from 1ROC TO 0.9ROC RenewableUK s initial preference on the banding level for onshore wind would have been to retain support at 1ROC/MWh in order to maximise the deployment of this technology, which is the cheapest renewable option that can be delivered at scale. However, we understand the desire to minimise the cost to the consumer while still supporting adequate deployment to meet targets for renewables and carbon reduction. It is worth reinforcing that this is a period of great uncertainty for the industry, with a great deal of review and reform taking place across the energy market, and so large change in the banding level would very negatively impact investor confidence. There are a number of unknown factors including the outcome of Ofgem s Project TransmiT and its corresponding impact upon the cost of renewables generation in Scotland in addition to other uncertainties such as variable grid connection and future electricity market reform. It is important to note that a reduction in support for onshore wind will disproportionately affect smaller projects, particularly below 5MW. The figures produced by Arup for DECC support this assertion, as do some unpublished figures produced for RenewableUK by Garrad Hassan, from a survey of projects delivered in these can be shared on request. Proposal to introduce a band for experimental Offshore Wind RenewableUK finds the idea of a specific, limited band for innovative offshore wind technologies to be an attractive one, and would wish to explore the concept further with the Scottish Government. There appears to be a good case for providing a steppingstone between single-machine technology demonstrators and full commercial roll-out, through support of small arrays of innovative turbines. This is analogous to the band being proposed for wave and tidal stream, with support given that is higher than that to the marginal technology needed to meet 2020 targets in recognition of the longer-term industrial benefits that new technology can provide. We would note, however, that the best support mechanism to encourage the initial innovation is in the form of capital grants, given the inherent technology risk in such developments. While enhanced revenue may have a part to play in the later stages of innovation, we would encourage the Scottish Government to seek out sources of capital funding to buy down this earlier technology risk, perhaps through EU research funds or the Fossil Fuel Levy receipts recently released by the UK Government. Doing so would, alongside an experimental offshore wind band in the RO, increase the visibility of route to market for new technology in Scotland, making this country more attractive to industrial investors.

3 Do you agree with our proposal to set enhanced bands for both wave and tidal stream generation at 5 ROCs? RenewableUK welcomes the proposal to raise support for wave and tidal stream under the RO to 5ROC/MWh. We would, however, encourage both the Scottish and Westminster Governments to swiftly make clear their intentions for wave and tidal stream under the CfD in order to allay investors concerns for the medium to long term development of marine renewables. What are your views on the need for a capacity threshold to apply in conjunction with the enhanced wave and tidal ROC rate? If there is such a need, should the threshold apply at an aggregated level or to individual projects? If there is to be a capacity threshold, it is vital that it is set at a project level. An aggregated capacity limit would curb the number of projects eligible for support and deter needed investment. RenewableUK has particular concerns over the potential consequences of the budgeted capacity of wave and tidal generation being met or exceeded within projected timeframes. Should this occur, we would strongly urge the UK and Scottish Governments not to launch an emergency review of the RO band as this would create a great deal of uncertainty and damage confidence in marine energy investment in Scotland. We note the UK Government s proposal for a 30MW project cap for the 5ROC marine band. This level of project cap is certainly appropriate in England and Wales, where significant leasing activity has not yet been undertaken by The Crown Estate. The situation is different in Scotland, however, with considerable project capacity already in development which potentially could be delivered in the 2017 timeframe. We are concerned, however, that if projects larger than 30MW are built in Scotland with access to the 5ROC band, then this could lead to overdelivery of marine ROCs, triggering a disruptive review of support. For simplicity, it may be best to align the project cap with that proposed by DECC; if the Scottish Government is minded to set a higher cap, then it must be absolutely clear that the risk of such a review is very low. We do have some concerns about the messages that are sent out by how production from capacity above the project cap is treated. The DECC proposal is for support to drop from 5ROC to 2ROC once the project cap is reached. At this level of support, additional capacity could not be built and so the project limit would not be exceeded, as would appear to be intended. In order to make clear the intent of the drop as a limit and not a comment on Government s expectation of cost development, it would be best to use the level of support given to offshore wind at the time of accreditation, as is given to any other technology that is more expensive than this marginal technology to meet targets for What are your views on our proposal not to incentivise new large scale dedicated biomass electricity? Under which circumstances under would it be appropriate to set a threshold for electricity only generation? At what level should any threshold be set? This subject is outside RenewableUK s competence What are your views on: whether or not our incentives under the ROS in Scotland should mirror the UK Government s proposals on enhanced co-firing and conversion? whether a maximum threshold for biomass CHP plants is required?

4 the continued appropriateness of the 90% biomass content threshold? This subject is outside RenewableUK s competence What are your views on the proposals as published for governing transition between the RO and its proposed replacement? Do you believe that there are particular issues as far as Scottish projects are concerned, and which might justify a different approach? In the transition from the RO to a new mechanism under the Electricity Market Reform, we would seek uniformity of approach throughout the nations of the UK. The timetable set out by the UK Government is tight, and we would not want to have additional risks of delay introduced through differences in implementation. We would also be grateful to hear your views on the existing proposals for grace periods, and whether there are any additional circumstances or approaches which we should consider. We agree with the general thrust of the proposal to only grant grace periods to projects that, though no fault of the developer, are delayed beyond 1 April If this proposal is to prove effective, it will need to be clarified by spring this year to give confidence to developers that they can sanction investment with some certainty that they can secure the 1ROC support level. We would also argue that simple rules for assessing whether a project qualifies for a grace period are necessary in order to give financiers comfort that projects will indeed receive 1ROC. However, we believe it is highly unfair to propose that the 20-year RO clock starts ticking from 1 April 2013 in these circumstances, when developers have made good-faith efforts to meet that deadline. If the grace period is invoked, then it is vital that a project should get the full 20 years of support at the old multiple from the date of full accreditation. We believe that the six months allowed for the identified reasons for invocation of grace periods is too short. Grid and radar issues can be difficult to resolve and take considerable time. We therefore recommend that the grace periods are extended to at least one year, and up to two years if the developer can show good reason to be granted further grace. There are other potential barriers to delivery of projects that are outside the developer s control. These could include getting a plan for transport of components to site agreed with the relevant local authorities en route. It is possible that in this case, authorities could be deliberately obstructive in the hope that a project is stopped as a result if it is delayed beyond 31 March We would appeal to the Scottish Government to consider further reasons for invoking grace periods to avoid such situations. On the criteria that may be used to judge if a grace period is appropriate, certainly developers will have to prove that their set of contracts for the work allows the project to be delivered in time, but there needs to be flexibility on the criteria otherwise to allow for when in the build programme it becomes necessary to invoke the grace period. Care needs to be taken with this process as it will set precedents for any grace periods being set in 2017, when the RO closes to new entrants. We would hope that experience from the procedure used for 2013 be assessed before deciding the final procedure for 2017.

5 In consulting our members on grace periods, it has become clear that there is considerable concern around the issue. We have offered to DECC that RenewableUK can swiftly convene a working group of interested parties to ensure an equitable and fair set of proposals on the subject, and we would hope the Scottish Government can support this idea in order to ensure a smooth transition from 1ROC/MWh to 0.9. For further information please contact: Gordon Edge RenewableUK Director of Policy [email protected] Tel: James Hubbard RenewableUK Economics Policy Officer [email protected] Tel:

6 Changes to Renewables Obligation (Scotland) Order RESPONDENT INFORMATION FORM Please Note this form must be returned with your response to ensure that we handle your response appropriately 1. Name/Organisation Organisation Name RenewableUK Title Mr Ms Mrs Miss Dr Please tick as appropriate Surname Edge Forename Gordon 2. Postal Address Greencoat House Francis Street London SW1P 1DH Phone Permissions - I am responding as Individual / Group/Organisation Please tick as appropriate (a) Do you agree to your response being made available to the public (in Scottish Government library and/or on the Scottish Government web site)? (c) The name and address of your organisation will be made available to the public (in the Scottish Government library and/or on the Scottish Government web site). Please tick as appropriate Yes No (b) Where confidentiality is not requested, we will make your responses available to the public on the following basis Please tick ONE of the following boxes Yes, make my response, name and address all available Yes, make my response available, but not my name and address Yes, make my response and name available, but not my address or or Are you content for your response to be made available? Please tick as appropriate Yes No (d) We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for Scottish Government to contact you again in relation to this consultation exercise? Please tick as appropriate Yes No