UK renewables review explores policy options

Commitment to "work towards" 10% share in electricity generation by market mechanisms

UK energy minister John Battle today unveiled a long-awaited review of renewable energy policy, restating his government's commitment to increase the share of renewables in electricity generation five-fold by 2010.

The minister said the review showed a "tremendous potential for renewables to become fully competitive." He noted that a target of 10% "appears to be feasible," and could reduce the UK's greenhouse gas emissions by up to 5 million tonnes of carbon in 2010. He also said that the government was on schedule to achieve an interim goal to raise the share of renewables from 2% at present to 5% by 2003.

A consultation period will now get under way to inform a future government strategy to meet the target. The renewables sector is currently funded by the non-fossil fuel obligation (NFFO). This is a market-based approach in which public electricity supply companies are obliged to pay a premium above a reference price for a given quantity of renewable electricity, with renewable generators bidding to provide electricity at the lowest premium.

Today's review explores options for funding increases in renewables capacity over the next ten years in a rapidly liberalising and fragmenting UK electricity market. It suggests that the responsibility could be placed on electricity distribution or supply companies, with an obligation to purchase a minimum quantity of electricity or generating capacity from renewable sources. Use of tradable certificates could help to meet obligations at the lowest cost. The 10% target could be met with renewable electricity priced at an average of 3.5p/kWh, the review suggests. This is higher than the current reference price but comparable to the average price paid by electricity companies last year for their renewables supplies.

The review also highlights the need to rethink land use planning policies to reduce obstacles to the installation of new renewables capacity, to develop energy crops for use in biomass energy projects and to find arrangements in the funding system for "embedded" electricity generators, which supply local markets and thus avoid transmission and distribution costs.

British Wind Energy Association spokesperson Nick Goodall welcomed the government's "recognition of the major part renewables has to play in energy policy," but said he would only be fully satisfied when "the dates and orders [for renewable energy contracts] are on the table." He also believes a greater commitment from government is unnecessary. "When it happens, people will want more, and the market will grow it further," he said.

Follow Up:
UK energy ministry, tel: +44 171 222 4382; British Wind Energy Association, tel: +44 171 402 7102. Reference: "New and Renewable Energy: prospects for the 21st century", available on the web at http://www.dti.gov.uk/renew/condoc.

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