Reports reiterate value of strong policy signals in clean energy revolution
As new research indicates that the global decarbonisation process can be kick-started by a small group of countries with the right policy incentives, a separate study has found that the UK Government can now deliver 1GW of new onshore wind subsidy-free.
Global decarbonisation can be driven by bold action from a few countries with long-term targets that send clear market signals to investors to support clean technologies, a report from research group Climate Action Tracker (CAT) has claimed.
The report highlights support mechanisms in “first-mover” countries such as Denmark, Germany and Spain, which spurred demand and research & development (R&D) in installed renewable energy capacity. Adoption of similar policies in other countries, notably China, and now in India, led to rapid growth of low-cost renewable energy products and manufacturing at scale, the research found.
“The policy packages of early movers included strong financial support schemes such as feed-in tariffs as well as mid-to-long-term renewable energy targets,” said Andrzej Ancygier, climate policy analyst at Climate Analytics, a CAT member. “These gave certainty to investors and triggered the massive growth and price drops we see today. This initiated the wide spread application of such instruments where, by 2015, 146 countries had implemented such support schemes.”
The CAT report examined the low-carbon trends in three key sectors of the global system: power, transportation and buildings. The study notes encouraging progress in the power sector, thanks to plummeting costs in renewables such as wind and solar energy. However, CAT recognises the need for policies to support the integration of renewables and replacement of fossil fuels through grid and storage development.
Electric vehicles (EVs) are transforming the transport sector, according to the study, which reserves praise for a few key players such as Norway, the Netherlands and California in contributing to EV sales reaching close to a million in 2016. CAT encourages countries to pursue the type of successful policy packages that kick-started the sector, such as a focus on uptake targets, campaigns on behavioural change, infrastructure investment, and R&D.
The final sector studied in the report is buildings, which is reportedly lagging behind the other two sectors. Although there are proven technological solutions, they are applied primarily at the margin and in niche markets, the report states. CAT suggests that if these solutions were effectively combined, they could result in zero-carbon buildings and be cost-effective over a building’s lifetime.
“Innovative financial mechanisms to increase the rate of retrofitting buildings, as well as good examples of building codes for new builds, would drive adoption of these technologies,” said Yvonne Deng managing consultant at consultancy firm Ecofys, another CAT member.
Subsidy-free onshore wind?
The report arrives on the same day as a new study finds that the UK Government could deliver 1GW of new onshore wind capacity – enough to meet the equivalent annual demand of 600,000 homes – at no additional cost to consumers above the long-term wholesale price of power.
Onshore wind has been locked out of the UK's Contracts for Difference (CfD) framework since 2015, with the current auction process only open to less established renewable technologies such as offshore wind.
The new report, produced by industry experts Baringa Partners on behalf of Scottish Renewables, claims that allowing onshore wind to participate in an auction would result in further cost reductions for the technology, which the Government already believes is on track to be the cheapest form of electricity generation in the UK.
According to the study, the capacity delivered through the auction would result in more than £1bn of private sector investment in clean energy generation across the country, and would displace some 8 million tonnes of CO2 during their lifetime.
Scottish Renewables chief executive Niall Stuart said: “The study’s findings reinforce that onshore wind can make a significant contribution to ministers’ ambitions for the Industrial Strategy.
“At these kinds of prices, the technology can continue to play a key role in cutting carbon emissions whilst keeping bills down for businesses and households – an important priority for Government. It can also secure inward investment and jobs across the country and drive the renewal of our ageing energy infrastructure.”
The CfD auction is expected to clear at £49.40/MWh, meaning that successful onshore wind projects would receive limited ‘top-up’ payments over and above the wholesale price of power (£50) in the first years of their operation. The report states that schemes would then pay back a greater amount to the public purse over the remainder of their contract as the wholesale power price increases, meaning the projects would essentially be ‘subsidy-free’.