September 29, 2016

Where Next for UK Renewable Energy Policy?

In November last year, former Decc secretary (and now home secretary) Amber Rudd said: “Frankly, if at all pos­sible, energy policy shouldn’t be noticed.” The comment came shortly after a con­troversial letter was leaked, where Rudd said it was difficult to know whether or not the UK would hit its 2020 renewable energy targets. So her comment could be read as her asking the public to pay less attention.

In early September 2016, the Energy and Climate Change committee con­cluded that, on its current course, the UK will fail to provide for 15% of its energy needs from renewable sources by the end of the decade. Many in the energy-from-waste (EfW) sector are still awaiting clarity from the Govern­ment on a number of policies.

Rudd’s agreement to the carbon budget for 2028-32 in the interval between the Brexit vote and her move to the Home Office gave hope to indus­try that the UK would continue to support renewable energy projects. But the industry awaits the results from consultations on changes to the Feed-in Tariff (FiT) and Renewable Heat Incen­tive (RHI) schemes, as well as details on the next Contracts for Difference (CfD) auction.

Despite the green light for the Hinkley Point C nuclear plant, there has been little vision on renewable energy. Post-Brexit, there appear to be more ques­tions than answers about the sector’s future.

As with recycling targets and landfill diversion, the EU has driven UK policy to support renewable energy growth. But now there is the question of whether future European targets will apply.
The Renewable Energy Directive set a target for the UK to get 15% of its energy from renewable sources by 2020. Decc planned to achieve this by generating 30% of electricity demand from renewables, 12% of heat demand and 10% of transport demand.

Those targets have been useful driv­ers for investment, with a particular boost for anaerobic digestion (AD) capacity. With this in mind, an EU exit could potentially have a damaging effect on the industry’s future.

But the domestic Climate Change Act included a commitment to reduce greenhouse gas (GHG) emissions by at least 80% in 2050 from 1990 levels. A series of caps (carbon budgets) on the amount of GHG emitted in the UK during a five-year period have been agreed, the latest coming in the week after the Brexit vote.

James Court, head of policy at the Renewable Energy Association (REA), praised the acceptance of the latest budget, including plans to hit a 57% reduction in emissions by 2028-32, saying “it would have been a very easy decision to have delayed”.

Matt Hindle, head of policy at the Anaerobic Digestion & Bioresources Association (ADBA), also described it as a “strong signal from the new Govern­ment in committing to the fifth carbon budget and testing emissions reduction targets”.

Ricardo Energy & Environment prin­cipal consultant Mark Ramsey ex-pressed similar optimism in a company blog: “Even freed from the shackles of EU directives, we are most unlikely to revert to dumping everything in a landfill.”

Department for Business, Energy & Industrial Strategy (Beis)

New prime minister Theresa May made some headlines in her decision to incor­porate Decc into a newly formed department. Ed Miliband, the abolished department’s first secretary of state in 2008, described the change as “just plain stupid” on social media, warning that climate not being in the new department’s title could lead to it no longer being a Government priority. But others in the industry have expressed greater optimism, partly due to Greg Clark being announced as the first Beis secretary.

Court said that Clark had changed the Conservative Party’s thinking on climate and renewables while he was shadowing Miliband. He also praised the appointment of Nick Hurd as climate change minister, who has chaired some Tory green groups, in-cluding its climate change subgroup of the quality of life policy review com­mission.

With regards to the new depart­ment’s title, Hindle said “the deeds matter more than the names”, but he expressed some regret at the loss of Decc.

“I think there is a concern about where climate change fits in the pecking order when that sort of change is made, having one fewer secretary of state at the Cabinet table who institutionally cares about climate change issues. But that can be solved by the priorities that the ministers in the new department go ahead with, and what they choose to focus their time and efforts on.”

Court was more confident in the new department: “It is a bigger department and we welcome it being moved into business and part of the industrial strat­egy. Renewables have come away from being a cottage industry and are now much more part of the mainstream.” Eunomia’s head of energy Adam Baddeley said: “What we are hoping is that there will be a wider industrial strategy that takes into consideration what the waste and resource manage­ment sector can offer.”

And Court commented: “We really need the secretary of state now to come up with a carbon plan by the end of the year that really shows a way forward so my members, investors and developers can push ahead.”

Advanced conversion technologies (ACT)

The EfW sector has been rocked this year by a few big players leaving, in-cluding developer Air Products and construction firm Interserve. Air Products dropped two identical plasma gasification facilities on Tees­side, TV1 and TV2, in April after finding “additional design and operational chal­lenges” with the plants. This led to for­mer communities secretary Clark delaying his decision to approve another ACT plant – Peel Environmental’s Bilsthorpe Energy Centre – for fears it relied on failed technology. However, he approved the plant after further consul­tation.

Interserve, meanwhile, is exiting six projects after problems with contracts forced it into a £34m half-year loss. And EfW technology firm Energos, a frequent supplier of Interserve’s plants, entered administration this year. The next CfD auction is now seen as “the only game in town” for new ACT projects looking for Government sup­port. The auction is believed to be tak­ing place later this year, and Court said clarity was needed on its details.

Currently, there is one pot for solar and onshore wind projects, one for dedicated biomass conversions and another for everything else – but this could all change.

“The industry desperately needs some certainty about what the criteria is going to be, what the budget is going to be, what can they bid in for, when is the auction going to happen?” Court said.

Some projects are going ahead with­out subsidy, such as the Ferrybridge Multifuel plants, and the sector aims to be subsidy-free within five years. Baddeley believes this is achievable.

“I do not think incineration needs a subsidy,” he said. “The market for refuse-derived fuel exports has con­strained some infrastructure develop­ment, although a lot of the stuff going for export has been coming out of land­fill. That said, prices are hardening in the export market.”

Anaerobic digestion

One of the biggest growth subsectors within renewable energy in the past few years had been AD, driven by Govern­ment policy to increase renewable energy and subsidies to support it. The FiT scheme was a major source of this support, but a 20MW annual cap on overall support has “effectively killed off ”the pipeline of projects that were in place, according to Baddeley.

The RHI is now the main form of support for AD plant construction, with former chancellor George Osborne announcing in last November’s compre­hensive spending review an increase to £1.15bn RHI funding by 2021, up from £430m for 2015-16.

At the time, ADBA said this could lead to an additional 140 biomethane plants being built, a fourfold increase. But Beis has now proposed an amend­ment to the RHI to reduce the support for combined heat and power (CHP) systems. The manner of the proposal was criticised by Court.

“There was a concern around effi­ciency levels and around about it being a potential area for abuse. We are disap­pointed the Government did not give the industry the chance to try to correct it ourselves.”

The REA found £140m-worth of stranded investment resulting from the change after surveying 36 companies that are developing biomass CHP pro­jects in the UK.

Another issue facing AD plants is a lack of feedstock, with many estimated to be only two-thirds full. While Scot­land has pressed forward with mandatory food waste collections, Defra has not announced such a scheme (see Opinion, page 23). Nor has it made any statutory obligations for local authori­ties to provide kerbside collections of the material.

Despite these challenges, Hindle is hopeful the industry will be able to operate without subsidy in the long term providing it is competing on a “level playing field”.


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