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Will Britain Abandon its Quota System in Favor of Feed-in Tariffs?

In a potentially precedent-setting move for the English-speaking world, Great Britain's ruling coalition proposes abandoning its long-running experiment with so-called "market reforms" of the 1990s.

Included in the proposal released by Chris Huhne, Energy and Climate Change Secretary December 16, 2010, is a wholesale revision of the country's Renewable Obligation, the British version of Renewable Portfolio Standards (RPS).

While the renewable targets will remain, the government proposes abandoning the mechanism for reaching the targets, the Renewables Obligation (RO). Instead the coalition government of the Conservative and Liberal parties proposes implementing a system of feed-in tariffs for "low carbon generation".

Britain, along with the US, has been the principal intellectual and political proponent of electricity trading in a de-regulated market as the principal means for developing new generation at what was promised to be the lowest cost to consumers. Similarly, the development of renewable resources in Britain through the RO, and in the US through Renewable Portfolio Standards, was premised on trading in renewable energy certificates and selecting individual projects through an auction or tendering system.

Following the Enron scandals of the late 1990s, electricity trading and de-regulation fell into disrepute. The widespread failure of programs with quota-driven markets, such as in Britain, to reach their renewable energy targets further tarnished the concept. Most jurisdictions with aggressive renewable energy policies long ago moved from quota systems to programs using feed-in tariffs to create dynamic markets for renewable energy.

Of major European countries, only Britain's RO and Italy's RPS for wind energy remain. Nearly all other markets have moved to fixed feed-in tariffs for renewable energy. Italy abandoned its RPS for all but wind in the mid 2000s. Britain abandoned its traditional subsidy program for renewables in late 2009.

Italy moved to feed-in tariffs for solar photovoltaics (PV) with its Conto Energia in 2006 and hasn't looked back. Italy, now the second-largest solar PV market in the world, is expected to install more than 1,000 MW in 2010.

Even Britain, one of the remaining examples of an European RPS program, implemented a comprehensive system of feed-in tariffs in the spring of 2010 for projects up to 5 MW.

Huhne's proposal follows the coalition's agreement coming to power of moving the RO to a system of feed-in tariffs. New feed-in tariffs could be in place by 2013, but existing contracts under the RO could be built through 2017. The latter is critical for Britain's booming offshore wind sector.

However, environmentalists have reacted with alarm to the government's inclusion of "low carbon" technologies in its proposal. "Low carbon" is code for nuclear power and Carbon Sequestration and Storage or CSS.

Renewable energy advocates have joked for years that nuclear power should be held to the rigors of a feed-in tariff market. Only then, they've argued, would policy makers learn the true cost of nuclear, and by extension that of CSS. In Ontario, for example, the rumored cost of new nuclear of $0.20 per kWh makes even solar PV look attractive.

If the government's program is implemented as proposed, renewable advocates may unfortunately get their wish. University of Birmingham lecturer Dave Toke has publicly warned that the nuclear wolf among the renewable sheep could lead to a massive slaughter as nuclear's characteristic cost overruns gobble up all funding for "low carbon" technologies.

Toke, an authority on Britain's complex RO, as well as an earlier failed program, the Non-Fossil Fuel Obligation (NFFO), has issued a call to arms for a robust, German-style feed-in tariff program that isn't a cover for the nuclear industry.

Ironically, it was the NFFO that former Prime Minister Margaret Thatcher implemented to help Britain's struggling nuclear industry with ideologically acceptable public support. Since then the British nuclear industry has been privatized and sold off to French and German utilities.

NFFO, an early quota program based on auctions, failed both as a means to support the nuclear industry and renewable energy. Only one-fourth of the renewable contracts won through NFFO auctions were ever built. It was the failure of the NFFO auctions that led Britain down the ultimately unsuccessful RPS path.

Toke's warnings are taken seriously within Britain's renewables and environmental community. They have painful memories of the government's past duplicity on renewable energy, or as Shakespeare said of "perfidious Albion."

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