Gov’s ‘confusing’ approach to renewables putting offshore wind sector at risk
The UK is not yet fully embracing the opportunities associated with an expanding offshore wind industry, according to a new report.
Published by the Institute for Public Policy Research (IPPR), the report claims that the UK is “pulling in two directions”, pursuing a short-term dash for renewables in the current decade followed by mixed signals in the 2020s and the prospect of a drop-off in renewable deployment, including offshore wind.
The report looks at how the Government plans to support the development of offshore wind through measures set out in the draft Energy Bill, which is currently before parliament. According to the IPPR, the Bill contains a package of policies to reform the electricity market and replace current support for renewables with new measures.
The reform has seen the Government announce a support package for new renewable installation through an extension of the Levy Control Framework to £7.6bn per year by 2020.
However, according to the report, there are two “inherent and confusing” contradictions in the government’s approach to renewable power, and offshore wind in particular.
“The first lies in the stated ambition of government ministers,” it states.
According to the IPPR, in interviews with industry, positive government rhetoric on offshore wind from the prime minister David Cameron and energy secretary Ed Davey has contrasted with the chancellor George Osborne’s ambition for the UK to become a ‘gas hub’.
Opposing the chancellor’s plans, the Committee on Climate Change (CCC) has said that this carbon pathway would ‘store up costs and risks for the future’.
The report also stresses that although the differences in Government may appear simple negotiations amongst the Coalition, government projections of the sources of new generation to 2030 put this “lack of clarity into context”.
Estimates show that between 2012 and 2020 there will be 34.7 gigawatts (GW) of new renewable capacity added to the grid, making up around 80% of a total of 44.1GW of new capacity.
Offshore wind is the second biggest component of this new capacity, and is projected to provide a total of 11.5GW by 2020, which is “crucially, much less than the ambition of 18GW outlined by DECC,” it states. DECC recently announced that the subsidy regime would lead to deployment of 8-16GW by 2020.
The report highlights that the Government has been unwilling to provide any certainty beyond 2020 for its offshore wind ambition despite this being the policy that would “most effectively guarantee cost reduction (to a level below £100/MWh) and growth in the domestic supply chain”.
It also warns that there are currently no details about the size of the Levy Control Framework after 2020 and that the Government has refused to adopt a target to decarbonise the power sector by 2030, despite the advice of the CCC.
“[The Government] also opposes a renewable target at the EU level as ‘inflexible and unnecessary’,” it continues.
Highlighting the need for a long-term strategy, the report stresses that offshore wind developers and suppliers need to know “what the demand will be for their product beyond 2020”.
After that point, however, new capacity is projected by the Government to come primarily from nuclear, carbon capture and storage (CCS) and new gas.
Out of a total of 39.9GW of new capacity in the 2020s, 7.6GW (19%) is expected to come from new renewables, including 4.4GW from offshore wind (5%).
At the same time, by contrast, gas (54%) and nuclear (21%) are expected to make up the bulk of the new capacity.
The IPPR warns that in effect, this policy means that the Government is undertaking a ‘dash for renewables’ in the current decade followed by a ‘dash for gas’ in the 2020s.