UK: REA seeks government clarity on renewables following Hinkley Point nuclear deal

The U.K.’s Renewable Energy Association (REA) has called upon the British government to make its stance on renewable energy clear, a day after a major deal between the U.K. and China was signed for the development of the controversial Hinkley Point C nuclear reactor.

Given the terms of the nuclear deal – a 35-year contracts for difference (CfD) contract securing nuclear power at £92.50/MWh ($143) – more than double the current wholesale price of electricity – the REA is concerned that the plant will prove costly for billpayers, and has asked the Conservative government to explain why renewable technologies – which boast falling prices at cheaper and shorter CfD contracts – are having their subsidies slashed.

According to the REA, there have been 11 major proposed and confirmed changes to renewable energy support and subsidy over the past decade, and further six changes to wider energy policy. This apparent lack of joined-up thinking concerns the renewables industry, and is in stark contrast to the determination and single-minded manner in which the government has pursued this latest nuclear deal.

"The REA welcomes the government’s continued commitment to low carbon energy production, but urges them to reveal the overall energy strategy," said Nina Skorupska, REA chief executive. "The industry and the public are concerned and unclear about the future of renewables, many of which are roaring towards the point in which they need no subsidy at all."

The CfD mechanism can deliver a strike price for solar energy that is 15% below that achieved for nuclear based on one unit of electricity, and costs for solar will continue to fall as the contract matures. Such simple economics were also presented directly to ministers yesterday, when the Solar Trade Association (STA) unveiled its £1 plan – a scheme devised to amend the FIT to ensure solar support adds just £1 to consumers’ annual bills between now and 2019 – at Westminster.

In the second quarter of this year it was revealed by Ofgem – the U.K.’s energy watchdog – that renewable electricity accounted for one quarter of the country’s power, placing it ahead of coal and nuclear for the first time.

"The REA is very interested to understand the government’s vision for decentralized energy production in the U.K., which allows communities, homeowners and businesses to directly take a stake in their energy future," concluded Skorupska.

Benefits of decentralization

A report published this week by U.K. solar firm Lightsource, in tandem with Foresight Group and Good Energy explores the benefits of a decentralized energy system for the U.K. and finds that rapid technological breakthroughs are turning passive consumers into active consumers.

The report looks at the decisions the government has to make in terms of balancing a steady, reliable and affordable energy supply with legally binding renewable energy and carbon reduction targets, and argues that the best way to achieve this balance is to eschew large-scale plants and instead unlock the potential of decentralized energy using solar PV.

"In line with global trends, it is expected that solar PV will be the first low carbon technology to reach grid parity in the U.K.," said the report. "However, the rate at which it would reach grid parity is more uncertain as this is largely dependent on the cost of fossil fuels." The report cites an earlier report by KPMG and the REA that estimated that solar PV will reach grid parity over the next few years in the U.K., even given the recent subsidy cuts enacted by the government.

The report also calls energy storage "the game-changer", which will allow for the de-coupling of onsite generation from consumption, recalling a Citigroup report from January that predicts the global storage market will reach 240 GW by 2030. Barriers to the evolution of decentralized energy include regulatory and policy roadblocks – such as the significant tariff cuts – and the lack of incentives for Distribution Network Owners (DNOs) to actively expand the country’s storage capacity.

Network and demand-side constraints are also a concern, prompting the report to deliver a series of key recommendations, including: a re-profiling of the FITs within the overall Levy Control Framework (LCF); the introduction of a time-limited deployment grant for storage technology; highlight the value to the grid that decentralized, storage-backed energy offers, and incentivize DNOs to support the deployment of decentralized energy.