The renewables target: an immense (and costly) challenge

The government’s recently launched consultation (the consultation) on achieving the 15% renewables target set by the EU by 2020 is upbeat in its approach (see box “Web links” ). But is this a realistic goal or pie in the sky?

The driver

In March 2007, EU member states agreed new targets for renewable energy and biofuels. By 2020:

• 20% of the EU’s energy (electricity, heat and transport fuels) will need to come from renewable energy sources.

• 10% of all road transport fuels sold in the EU should be biofuels.

In January 2008, the European Commission (the Commission) published a draft Directive setting out how these targets should be divided up among the member states (www.practicallaw.com/8-380-8873).

As currently drafted, the UK would be required to ensure that 15% of its overall energy comes from renewable energy sources by 2020. The draft Directive is currently being debated by the EU Council of Ministers and the European Parliament.

The EU’s (and the UK’s) climate change action plan revolves around two relatively simple concepts:

• Reduce the amount of energy we use in the first place (primarily by becoming more energy efficient).

• Produce energy in a way that generates less greenhouse gas emissions (primarily by using renewable energy sources such as wind, solar and biomass).

At present, only 8.5% of the overall energy used in the EU comes from renewables. The Commission realises that the 20% target is an ambitious one, but it is adamant that if the EU does not increase the uptake of renewables it is going to be practically impossible to meet its targets for reducing greenhouse gas emissions.

The UK consultation

In the consultation, the government acknowledges that meeting the 15% target is going to be an “immense challenge” and is likely to require around £100 billion in investment in renewable technology from the private sector.

At present, only around 1.5-2% of the UK’s overall energy (not just electricity) comes from renewable energy resources. Under existing policies and incentives, the government expects this to rise to 5% by 2020. How then is the UK is going to bridge the 10% gap by 2020?

The story so far. The consultation document starts off with the government patting itself on the back about everything it has done so far to promote renewables, primarily:

• The Renewables Obligation, and the changes it is proposing to make to this through the Energy Bill to increase incentives for less well-developed renewable technologies.

• The changes it is proposing to make through the Planning Bill to simplify and speed up the way in which consent is obtained for large-scale energy infrastructure projects (such as large wind farms and upgrades to the national grid transmission network).

• Round three of the UK’s offshore wind farm leasing programme, which is being carried out by the Crown Estate and is expected to result in a significant increase in the amount of electricity generated using wind power.

What else can the UK do? The principal proposals include:

• Making additional changes to the Renewables Obligation to improve the way in which operators can benefit from supplying renewable energy through the centralised national grid.

• Improving the national grid to make it easier for renewable energy operators to connect to it.

• Introducing new incentives to encourage heat to be produced using renewable energy sources.

• Considering (but not necessarily endorsing) the introduction of a feed-in tariff for microgeneration (that is, electricity produced by households and businesses onsite using small-scale renewable energy technologies).

The biofuels wildcard. The government estimates that to meet the 15% target by 2020:

• 32% of the UK’s electricity would have to come from renewable sources (compared to 5% at present).

• 14% of the UK’s heat would have to come from renewable sources (compared to 1% at present).

However, these calculations are based on the assumption that 10% of the UK’s road transport fuels will come from biofuels.

A recent report (the Gallagher Review) commissioned by the government warns that the UK and EU should reduce their biofuels targets and introduce stronger controls to ensure biofuels are produced in a sustainable way. Biofuels have been the subject of a great deal of controversy of late, including being blamed for increases in global food prices and deforestation.

Rhetoric vs reality

Clearly, the measures currently in place in the UK to encourage renewables have fallen well below the mark, putting the UK at the bottom of the EU league.

The consultation is big on rhetoric but what is needed is a brave new strategy if the UK is to deliver the step change needed to reach the 15% target. The government has a very short time in which to persuade the private sector to make considerable investment. Arguably, the proposals in the consultation fall disappointingly short of what is really needed.

Perhaps most frustrating is that the government’s own renewables advisers, the Renewables Advisory Board, published a report just a week before the consultation was launched, setting out the framework for the much-needed brave new strategy (www.practicallaw.com/6-382-2399).

However, cynics would argue that the UK’s commitment to a massive increase in renewable energy should be seen in the context of two possible back-ups mentioned in the consultation:

• The government wants to convince the EU that there should be some sort of renewable target trading scheme, whereby member states that have exceeded their EU target can transfer their surplus to member states that are lagging behind.

• Plans to build a new fleet of nuclear power plants, which at present do not count towards the 15% target but might provide a back-up plan if the UK is unable to deploy enough renewable energy in time.

On the other hand, if the EU’s ultimate aim is to reduce greenhouse gas emissions, then does it matter where or how that happens, provided it is done in a sustainable way?

Sara Feijao, PLC Environment.

The consultation closes on 26 September 2008 and the government aims to publish its response in spring 2009.