The EU is now committed to obtaining 20% of its total energy from renewables by 2020. The current level is about 8.5%, three quarters of which comes from hydro-electricity and biomass. Expanding this to 20% in 11 years is possible – indeed essential. Meeting the target would help control climate change and also greatly increase EU energy security and create many new jobs and industries.
The target will only be met, however, if there is a focus on renewable gas as well as electricity, a reduction in land-use planning delays, a rapid expansion of the electricity grid (both on and offshore) and increased regulatory stability.
The EU has set the targets but most of the policy levers on energy remain at member state level. And so while renewables will in the future provide cheaper (and more secure) energy than fossil fuels, billions of euros are still needed in investment in the transition to a low-carbon economy. If it is serious about meeting the Renewables Directive targets — and the other 2020 targets agreed in the climate package in December 2008 — the Commission must prioritize investment in low-carbon technologies and practices.
A better Europe-wide grid is important to cover intermittent energy sources such as wind (since it is likely that there will usually be enough wind blowing somewhere in Europe). So the Trans-European-Network for Energy (TEN-E) Program should be accelerated.
About three-quarters of renewable energy today is renewably generated electricity. But only one-fifth of EU energy consumption is electricity (though this will rise as transport becomes increasingly electric.); the rest is for heat and for transport. The Renewables Directive target is for energy, not electricity, so it is essential to consider renewable heat and transport fuel as well. This doesn’t mean neglecting renewable electricity, but it does mean a determined focus on heat.
Biogas, can be fed into the gas grid, mixed with natural gas, and used in exactly the same way. Biogas is already being injected into the gas grid in France, Germany Austria and in the U.S. in New York. The most established way to produce biogas is through Anaerobic Digestion (AD). AD involves putting organic waste (sewage, manure, food waste etc) into a container, where it is kept without oxygen at a high temperature (around 40 degrees centigrade) and becomes gas and solid compost.
AD is currently used in many sewage works and some waste treatment plants, though the biogas, absurdly, is often flared. The compost, if it is made from waste or animal manure, can be used on fields or gardens, and is an excellent fertilizer. If based on human sewage, there is no practical reason why it cannot be used as fertilizer, but public opposition would be strong (even though human sewage has always been used as manure and is still widely used in the developing world). So the solid compost from sewage AD could be incinerated (to generate electricity) or buried.
But £20 billion of this is on new waste infrastructure that needs to be built anyway, so the net cost is £10 billion.
Biomass is potentially very good, but should be used to provide heat as well as power, and be grown in a low-intensity way. Growing it using a lot of pesticides and non-organic fertilizer can lead to biomass having little or no climate impact advantage over a combined cycle gas turbine (CCGT) power station. For example, using short rotation coppice chips to generate electricity can produce 85% less emissions per unit of energy than a CCGT, whereas using straw can produce 35% more. Subsidy to intensive agriculture accounts for roughly 85% of all CAP spending. The Agenda 2000 paper “A CAP for the future,” announced by the EU as a means of making the CAP sustainable, does not mention climate change.
The renewable energy that must be rapidly expanded to meet the 2020 target is wind power. The main obstacle to onshore wind development is land-use planning, in which the EU has no role. For offshore, however, the main barrier is cost, including the cost of grid connection. A grid covering the North Sea would be expensive, but would have enormous climate, energy security and economic advantages. This should be funded through the Trans-European Network for Energy.
I should first explain that when I worked for government and NGOs, I assumed (as most of my colleagues did) that talk of regulatory risk was just business bluff to avoid unwelcome change. But now that I’m doing some consultancy work for RWE npower renewables, I know the renewables business better than before, and am now convinced that regulatory risk is a real issue. Discussion of whether and how the regulatory regime should be changed means that investors do not know what system will exist for the duration of their investment. This increases the cost of capital. Of course, now that I’ve written this, some people will assume that I’ve simply joined the bluff brigade!
There are essentially two types of regulatory framework to promote renewables: the Renewables Obligation (UK)/Renewables Portfolio Standard (U.S.) and the Feed-in tariff (FIT, used in Europe)/net metering (U.S.). Either can work well, or they can be combined, as some U.S. states do and the UK is now proposing to do. It does not much matter which approach is adopted: the important thing is to promote regulatory stability.
In the UK there has been a very lively debate throughout the last decade, with some campaign groups (notably Friends of the Earth) and industry associations arguing for Feed-in tariffs (FITs). Most developers operating in the UK prefer the Renewable Obligation Certificates (ROCs). This is primarily because they do not want unnecessary regulatory change. The FIT gives operators a guaranteed level of income per unit of electricity produced, whereas the ROC value fluctuates depending on the total amount of renewable electricity produced in the UK each year. The cost of capital for renewable investment is therefore lower in countries that have FITs than in ROC countries. Yet the “regulatory risk” of the UK debate increases the cost of capital by more than the difference between FITs and ROCs. So the UK has the worst possible option: higher cost of capital due to ROCs rather than FITs, and higher still due to regulatory risk.
The UK government’s current proposal, to retain ROCs for large electricity projects and introduce a FIT for schemes up to 5 MW, is sensible. But there will be a general election, and probably a new government, in 2010, and one or two further general elections before 2020 and with each new election a new set of regulations could come into play.
So, to reduce regulatory risk, there should be a cross-party statement that the framework will remain essentially unchanged before 2020. This should include the Conservatives, Liberal Democrats and Labour, and also the SNP (as Scotland has some powers over the RO) and Plaid Cymru (as Wales is demanding these powers, and will probably be given them before 2020).
Supporters of FITs argue that countries that have them are installing more renewable energy capacity than the UK. This is true, but the success is not due to the different regulatory regime. For example, in Germany, which has almost three times as much installed renewable capacity as the UK does, the planning system causes much less delay, the grid is more extensive and efficient, and the tariffs paid for fed-in renewable electricity have been extremely high.
When designing a system from scratch, FITs are better than ROCs. This is the case for renewable heat in the UK. The government is proposing to introduce a Renewable Heat Incentive (RHI), basically a FIT for renewable heat, but without a threshold so that a renewable heat scheme can receive RHI payments whatever size big it is. This is a good proposal, and the cross-party statement should cover the RHI as well as ROCs/FITs.
So with just a few shifts in focus, a more determined effort to reduce land-use planning delays and expand the electricity grid and increased regulatory stability, the UK should be able to meet the EU renewables directive 2020 target.
Stephen Tindale is a Climate and Energy Consultant and co-founder of Climate Answers.