Connecting the Future - Greenpeace UK

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Connecting the future: the UK’s renewable energy strategy Energy systems 12 1.1 The international context The government has stressed how ambitious the EU renewable targets are, and how demanding it will be to meet the UK’s allocated share. It strongly hints that it will seek to negotiate down the UK’s allocation on the grounds that the country is starting from such a low base for renewable energy (BERR 2008c). So it is worth considering efforts in other EU states, which could provide lessons on how the UK can best meet its 15% allocation. 1.1.1 Germany In Germany, under the 1990 Electricity Feed Act and the 2000 Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, or EEG), electricity suppliers are required to buy renewable output and pay a set price for it. This guarantees both a market for renewably generated electricity, and a price which allows an adequate rate of return on the financial investment in the project. The prices are set according to which renewable technology is used, the year the project was built and the size of the plant. Although the tariff for a particular project is set for 20 years, giving the developer certainty about the price they will receive per unit of output, the tariffs for a technology as a class generally declines over time to reflect the falling costs of that technology as it is developed and refined. The EEG was revised in 2004 to adjust the tariffs: while some were raised, notably for photovoltaic installations, others fell significantly, including that for onshore wind energy generation, to reflect the increasing cost effectiveness of the technology (Held, Ragwitz et al 2007). The EEG set a target of achieving 12.5% renewable electricity by 2010, and at least 20% by 2020. The target, however, has already been achieved, with renewables providing 14.2% of Germany’s electricity consumption in 2007. The cost of supporting renewably generated energy through the EEG is put at €4.3 bn in 2006 (€7.7bn minus € 3.4bn for energy companies’ avoided costs of purchasing conventional electricity) 1 . This translates to €1 ct/kWh, or around €1.45/month for a typical domestic customer (BMU 2008). The costs of the EEG should also be weighed against the broader socioeconomic benefits associated with the EEG. The Federation Ministry for the Environment, Nature Conservation and Nuclear Safety (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit, or BMU) estimates that employment in the renewable energy sector in Germany grew from 160,500 in 2004 to 249,300 in 2007 (BMU 2007). Turnover from the construction and operation of renewable energy projects in Germany was around €24.6 billion in 2007, and export markets have grown strongly, with Germany achieving a global market share in renewable technologies of around 15% (BMU 2007). German policy has also encouraged the emergence of a renewable heat sector, with biomass plants increasingly playing a role. Biomass plants receive tariffs based on the specific technology and size of plant, but also the plant’s efficiency and the type of fuel used. The efficiency bonus is awarded if the heat produced by burning the biomass is also used, this has created an incentive to invest in heat distribution infrastructure 2 (BMU 2008). In addition, small scale 1 These figures do not take into account downward effect on prices caused by renewables displacing the more expensive conventional generation (known as the merit order effect), nor avoided externalities associated with CO2 emissions. 2 The bonus is paid for the proportion of electricity which correlates to the heat used. This is calculated by multiplying the amount of heat used by the coefficient of the installation (BMU 2007a)
Connecting the future: the UK’s renewable energy strategy Energy systems 13 renewable heat projects in the residential sector, and small and medium sized businesses have been eligible for grants and loans under the Market Stimulation Programme (Marktanreizprogramm, or MAP). The renewable heat sector expanded from 3.5% in 1998 to 6.6% in 2007 (BMU 2008a). 16 14 Electricity production (% of total gross electricity consumption) 12 10 Heating supply (% of total heating supply) % 8 6 Fuel consumption (% of total road transport) 4 2 Share of RES in total final energy consumption 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Figure 1.1 Renewable energy share of energy consumption in Germany. Source BMU (2008a) In 1998, renewable energy provided 3.1% of total final energy consumption in Germany. By 2007, this had risen to 8.5% (Figure 1.1), and the German government has recently announced ambitious plans for further expansion to 2020: 25-30% of electricity consumption, 14% of heat consumption and 6.9% of transport fuel consumption (BMU 2007b). The rationale behind these plans is partly to reduce CO2 emissions, but is also aimed at driving innovation and expanding Germany’s role in the international market for renewable energy technologies. 1.1.2 Spain As with Germany, Spain has developed renewable energy policies shaped both by environmental concerns and industrial ambition. It has a target of 12.1% renewable energy by 2010, with renewable electricity supplying 30.3% of consumption. These are both challenging targets, and it appears unlikely that they will be met: renewables supplied 18.8% of electricity consumption in 2006, and 6.8% of primary energy (EREC 2008). The likely failure to meet the 2010 targets, however, does not mean that the expansion of renewables in Spain in recent years is not impressive. The wind sector in particular has grown significantly, from 2,235MW of installed 3 This has led to a revision to the tariff offered under the feed-in arrangements, which in turn is expected to slow future growth in the sector slightly.
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