Promoting Green Power in Canada - Centre for Human Settlements

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Promoting Green Power in Canada Pollution ProbeTable 3.9 — Government Spending on Renewable Technologies [HCEAC 2002, p. 36]Technology Foreseen Spending 2002–2005, in Million £DTI Press Release, PIU Report,March 10, 2001 November 2001Offshore Wind 10 2539Energy Crops 33 1512Advanced Energy Crop 18TechnologiesSolar PV 10Solar, Biomass, etc. 3 10Wave and Tidal 5Research, incl. Energy 10StorageAdvanced Metering and 4Control TechnologiesInformation and Support 4to PlannersNon-Specific (New 4Opportunities Fund)DTI: Department of Trade and Industry; PIU: Performance and Innovation UnitThe U.K. is backing the ROO with substantialfunding (see Table 3.9). Instead of definingtechnology bands, the ROO requirementsleave it up to market forces to determine whichkind of renewable technology will be developed— currently, wind dominates the scene dueto its low cost (see below). The budget is£283 million (C$638 million) over the nextfew years, including R&D funds [HMT 2001].Currently, most of this money is invested inoffshore wind and energy crops. Establishedtechnologies, such as onshore wind, onlyreceive £10 million [BWEA 2002]. Subsidiesfor selected technologies are meant to levelthe playing field so they can compete in theelectricity market.The allocation of government support hasbeen criticized for not recognizing thespecial need of emerging technologies, suchas ocean-based technologies, which have avery large technical potential (wave energy isestimated to have a potential of 600 TWh peryear), but are not supported according tothis potential. Support for solar PV also doesnot come close to (for example) Germany’slevels of support. Finally, funding decisionshave been made on an ad-hoc basis andrather need to be based on a long-termcommitment with programs that will survivea possible change of government in thefuture in order to create confidence forinvestors in renewable power projects[HCEAC 2002, p. 37].The effect of the ROO can be seen from thefollowing figures: the UK installed 64.6 MWof new wind capacity in 2001, bringing thetotal UK total for wind generation to 473.6MW, enough to meet 0.37% of the country’sdemand. Close to 200 MW is confirmed forconstruction in 2002, which would make it arecord year for the UK industry. Much largerproposals are lining up for the longer term.54
Promoting Green Power in Canada Pollution ProbeThe Crown Estate, which owns the UK’sterritorial seabed, granted approval for 13offshore wind farm sites in September 2001.The combined total of all 13 offshore windsites is expected to be between 1,000 MWand 1,500 MW. AMEC, an engineering firm,and British Energy, a nuclear power utility,subsequently unveiled in December 2001 aproposal to build what could become theworld’s largest wind farm, a project on theHebridean island of Lewis. The project, ifgranted permission, would eventually have agenerating capacity of some 2,000 MW,according to the London Times [AWEA 2002].Very good wind resources and the drop inproduction cost achieved over the periodwhen the NFFO was in force led manyenergy providers to readily invest in windgeneration, as this was their cheapest optionto provide for future energy needs, whileallowing compliance with the RenewablesObligation (see Table 3.10). This means windfarms can often cover their full generationcost based on wholesale prices and get thefull benefit of ROC trading and LECs. Adampener for wind deployment is still theneed for better planning provisions. Toooften, projects are denied a planning permitdue to local resistance. This has much to dowith (generally exaggerated) concerns aboutnoise and bird kill and can be alleviated ifthe regional Planning Officer is in favour ofwind energy, as is the case in Scotland[BWEA 2002]. An increasing number ofprojects in Scotland and Wales is beingTable 3.10 — Electricity Wholesale Pricesin the UK [BWEA 2002]Natural Gas-basedCoal-basedNuclear1.8–2.2 p/kWh2.6–3.25 p/kWh5.2–8.7 p/kWhWind-based (onshore) 1.9–3.1 p/kWhobjected to by the Ministry of Defense. Windfarms are often seen as interfering with radaror impeding areas for low-level flying, andthe Ministry has used its power to vetoplanning permission for more than 40% ofplanning permit applications in recent years[HCEAC 2002, p. 28].The ROO is expected to cost consumers about5% of their overall energy bill, or £780million, by the year 2010 [GP 2002b]. Itseffect on renewable power market prices isconsiderable. The ROCs are currently tradingfor 4.5p/kWh (10.13¢/kWh) in spot markets(but long-term contracts also yield pricesbetween 4 and 5p/kWh), which representsincome in addition to wholesale marketprices (1.6–1.8p/kWh or 3.6–4.05¢/kWh)for renewable electricity generators. With ageneration cost of renewable electricity ofbetween 4 and 5p/kWh (9–11¢/kWh), aboutthree to four times that of conventionalelectricity, this provides a good margin forthe renewable product. The New RenewablesObligation was designed so there would be ashortage of ROCs during the first few years,driving up their prices in order to provideextra support for emerging renewables.Although retailers can buy out of theirobligation at 3p/kWh, prices have exceededthis amount since any penalties paid to theauthorities are reimbursed to retailers thatfulfill their quotas, making it somewhatcheaper to comply than to pay the fine andnot receive this reimbursement. ROC pricesare expected to remain high even in futureyears and will probably not drop below 3p/kWh [DTI 2002c].Scotland, which has the best resources togenerate renewable power in Europe, plansto expand its capacities above and beyondexisting targets — 30 to 40% of its ownconsumption by 2020 [REF 2002b]. Since thetarget was announced, Danish wind turbinemanufacturer Vestas opened a wind turbinefactory in Scotland, and the government hasannounced it will support research into waveand tidal technologies. Scotland’s renewable55
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