The Government today revealed plans to drive economic recovery by investing in energy infrastructure, especially in renewable energy such as offshore wind.
The Department of Energy & Climate Change released proposed strike prices for renewables earlier than expected.
They will be available from 2014 – 2019 for renewable electricity including onshore and offshore wind, tidal, wave, biomass conversion and large solar projects.
The strike prices are being used to prevent price volatility risk for electricity generated from low-carbon sources, under new long-term CfDs being established by the Energy Bill.
They form a core component of the Government’s strategy to bring forward investment in affordable low-carbon electricity generation – including renewables, Carbon Capture and Storage and new nuclear.
Lights on, emissions down
Chief secretary to the Treasury Danny Alexander and energy and climate change secretary Edward Davey announced details on the reforms earlier today.
Mr Davey said:
“The Strike Prices for renewable technologies announced today aim to make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewables technologies, whilst minimising the costs to consumers.
“This will help boost home-grown sources of clean secure energy, and enable us to decarbonise the power sector, with renewables contributing more than 30% to our mix by the end of this decade.
“Our reforms will keep the lights on and emissions down, and will save consumers money on their bills. The result – low-carbon, affordable and reliable power for the long-term.”
Building confidence in renewables
CfDs (Contracts for Difference) are seen as vital to giving investors confidence to pay the up-front costs of major new infrastructure projects, with onsite renewables developed by manufacturers alone worth nearly £40m a year.
The DECC aim to ensure renewable energy makes up more than 30% of the UK’s electricity mix in 2020, as part of plans to significantly decarbonise the power sector by 2030.
With around a fifth of Great Britain’s ageing power plants due to close over the coming decade, and further closures in the 2020s, the Government is taking action to try and unlock up to £110bn energy infrastructure investment and support up to 250,000 jobs by 2020.
Fleshing out the details
The prospect of a wind sector strategy publication in the coming month will look to increase investment in the UK offshore wind supply chain. Industry and Government will need to work together to build a competitive advantage in a rapidly growing industry.
DECC have published nuclear and oil and gas industrial strategies already and say there will be an offshore wind industrial strategy in mid-July.
Renewable energy trade association RenewableUK welcomed the release of today’s draft strike prices for the technologies, but aired a note of caution on the need for plans to be a start to persistent support for renewables from government.
Maria McCaffery, chief executive of RenewableUK said:
“The confirmation of levels of the draft strike prices is a welcome step forward in setting out how the long term market is going to work. The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under contract for difference system compared to the Renewable Obligation.
“However, more details do need to be set out. The most important ingredient remains investor confidence and that will take time to land. The secret is consistent long term support and investors seeing that Government is behind renewables and low carbon generation for the long term.”
Concern for energy security
Concern remains strong in many quarters at the prospect of an inability to keep up with energy demands.
Dr Tim Fox, head of energy and environment at the Institution of Mechanical Engineers (IMechE), voiced his anxiety at a lack of strike prices for nuclear in particular.
Though Dr Fox welcomed today’s announcement, he believed it was time to “get on” with energy development.
“Today’s raft of announcements on energy infrastructure initiatives including nuclear, renewables and shale gas are long overdue and will go someway towards creating investor confidence.
He added: “Setting a strike price in the contract for nuclear power is however a critical step yet to be taken if we are to meet this country’s future low-carbon power needs. While we welcome today’s announcement of proposed strike prices for renewable energy sources – which will be put out for consultation – it is worrying that no strike price has yet been set for nuclear.
“The UK public is increasingly concerned about the country’s future energy security. An Institution poll last month found that 64% of people are concerned about possible blackouts, and that 93% are worried about higher electricity and gas bills. Today’s announcements from Ofgem that spare power capacity could fall to as little as 2% by 2015-16, creating a greater chance of blackouts, underlines this concern and the need to get on with energy infrastructure development without further delay.”
