Government proposals to reform the UK’s tradable renewable certificate system to support more technologies could be a risky gamble, according to PÃ¶yry Energy Consulting.
Richard Slark, principle consultant at PÃ¶yry, told EFP Online: “There’s a very high compliance case, or a very low compliance case and nothing in the middle.”
He was speaking following an Energy Institute conference in London on Tuesday. Ostensibly about the future of the renewables industry after 2020, the event was dominated by debate over proposals to reform or even replace the Renewables Obligation (RO).
The RO requires electricity firms to hand in renewable obligation certificates (ROCs) as a rising percentage of their total electricity supplies. These ROCs are awarded to renewable energy generators for each megawatt hour of power they produce, which they sell to utilities for additional revenue.
Although the regime has spurred investment in onshore wind generation, it has been criticised for failing to support other technologies as utilities opt for the cheapest way to meet their targets.
Reforms under consideration by the government could see the obligation banded, to ensure a portion of this support goes to technologies such as offshore wind, solar and tidal power.
Slark said that if the UK government sets banding at the right level, it could trigger sufficient investment to meet its target of sourcing 20% of electricity from renewables by 2020.
However, he warned that if the banding is set at the wrong level “you don’t achieve it”.
“The level on which the banding is set will have a profound impact. It’s going back to the policy of government picking winners,” he added.
Meanwhile, shadow environment minister Gregory Barker hinted that the opposition Conservative Party might scrap the obligation altogether if it comes to power at the next general election, replacing it with a feed-in tariff ““ direct payments to renewable energy generators.
Characterising the time the obligation has been in operation as “five lost years”, he said: “It has effectively been a bonanza for the generators and the onshore wind firms and landfill gas. That is not the pump-priming of the technologies of tomorrow that the RO was meant to be.”
But Andrew Jamieson, director of renewable business development at utility ScottishPower, said: “I like this mechanism.” On the argument that the obligation has favoured the cheapest sources of renewable power, Jamieson said: “That’s what market mechanisms are all about.”
Instead of reforming or replacing the obligation, Jamieson argued, government should seek out additional ways to support more expensive technologies such as offshore wind ““ including reform of the planning system.
Philip Wolfe, chief executive of the UK’s Renewable Energy Association, noted that the obligation had been changed about once a year since its introduction, and these constant modifications were putting off investors.
“The Renewables Obligation has proven to be effective at delivering the near-term technologies and there has been a lot of investment on the back of that mechanism and you are sending a very bad message to investors,” Wolfe said to Barker.
But Peter Fraenkel, technical director of Marine Current Turbines, argued that banding is needed. He warned: “If we don’t see growth before 2020, the people who are currently delivering these technologies will simply give up.”