Meeting the UK’s renewables target

The Sussex Energy Group have just published a new report commissioned by Friends of the Earth on the UK’s renewable energy target – and whether the current policy framework is sufficient to push the share of renewables in our energy mix from the current level of 3% to 15% by 2020.

Our report co-incided with Chris Huhne’s first annual energy statement to Parliament. Whilst there was the usual focus on large scale low carbon electricity technologies , he also said that ‘we … need incentives for small-scale and community action’. To make this concrete, he confirmed a regulatory measure had been implemented ‘to allow local authorities to sell renewable electricity to the grid.’

In the report, we argue that while the Coalition Government has reaffirmed the UK’s commitment to the 15 per cent renewables target, there is a long way to go to meet it. Renewable energy’s contribution in the UK has increased very slowly in the last 20 years. During this period there has been no shortage of policy initiatives and reviews to speed up progress. Renewables policy has been punctuated by periods of optimism that reforms would accelerate progress, only for this to seep away again as projects failed to get off the ground in sufficient numbers.

This report explains how the UK arrived at its current position. It draws particular attention to the ‘lock-in’ to a centralised, fossil fuel energy system which has been accompanied by weak support for renewable technologies and a lack of attention to systemic barriers to progress. While this places the UK at a particularly challenging starting point, this report also finds that many of the mechanisms of lock-in are beginning to weaken or to be addressed. It makes policy recommendations in five areas.

First, there is a clear case for bolder policy intervention to maximise the chances of hitting our 2020 target and to boost the renewables capacity beyond 2020. This does not mean the Government should micro-manage renewables. However, it does mean that stronger intervention is needed to overcome problems in several key areas as set out below.

Second, better financial incentives are needed to attract vital investment for developing renewable electricity. Shortcomings of the current incentive scheme – the Renewables Obligation (RO) – have contributed to the slow progress recorded to date. Recent reforms to the RO will help mitigate these, but it is not yet clear if they will have a significant impact on investor risks. A better approach would be to replace the RO with a feed-in tariff (FIT) that delivers a more certain return. We therefore support the new Government’s plan to expand the application of FITs – and argue that the related policy for heat (the Renewable Heat Incentive) should be implemented as planned in April 2011.

Third, it is crucial that we focus on what we have called ‘meso-scale’ renewables in the report (which many discussions classify as ‘community scale’). This middle level of renewables falls between large scale investments such as offshore wind farms and small scale generation in homes. Unlike many other northern European countries, the UK has almost no recent tradition of energy generation at this meso scale. If the potential for investment in towns, cities and other communities across the UK is ignored, the 2020 target will be much harder to meet. Policy reforms are needed so Local Authorities can become more active players, such as by raising finance for local renewable energy projects.

Fourth, widespread changes in network infrastructures – the pipes and wires that enable our energy system to function – are needed to cope with a rapid growth of renewables. Investment is needed to extend high voltage electricity grids to new locations (e.g. to connect offshore wind farms), to build new heat grids in areas of high heat density, and to ensure the early demonstration of ‘smart’ electricity distribution grids. There is a key role for the Green Investment Bank in co-financing these networks.

Fifth, the return of industrial policy in the energy sector is welcome, as is the commitment of the coalition Government to couple the low carbon agenda with job creation in the UK. Within this, it is important that support for technologies that will help us meet the 2020 target is balanced against more nascent options that could make big contributions beyond 2020. However, a robust, independent programme of monitoring and evaluation of government support programmes is also required as a matter of urgency to prevent capture by industry lobbies – and to inform decisions to adjust or even withdraw funding in the light of experience.