Utility Week

UTILITY WEEK | 1ST - 7TH DECEMBER 2017 | 9 Policy & Regulation David Oliver, consultant, Inenco "We welcome the move; low-carbon sub- sidies account for around 25 per cent of business energy bills, so clarity is essential for future forecasting – and we believe that tighter controls are necessary… The Levy Control Framework was created to provide support for low-carbon technology at the lowest cost to consumers, yet deals such as the Hinkley Point C nuclear contract have been agreed outside of the official framework, and will prove costly to consumers and businesses." Jonathan Marshall, energy analyst, Energy and Climate Intelligence Unit "Despite warm words from the dispatch box, Philip Ham- mond has failed to deliver on low-carbon energy. Keeping the carbon price floor unchanged was the bare minimum expected before the Budget, and does not make up for the hat-trick of freezing new low-carbon support, throwing North Sea oil and gas another lifeline, and shying away from fuel duty changes that would both encourage lower- carbon transport and tackle the air pollution crisis." James Court, head of policy and external affairs, Renewable Energy Association "The chancellor talked about embracing the future in his speech, yet hid away the details that he was blocking all renewables to market. Onshore wind and solar are already cheaper than new-build gas, and we have seen huge cost reductions happening in offshore wind, energy from waste and biomass. These are the technologies of the future and the government should be backing them, not blocking their progress. The renewable power and heat sectors are urgently calling for clarity around how the government intends to bring forward new capacity." Claire Mack, chief executive, Scottish Renewables "The UK government's Budget is the first since the publication of its Clean Growth Strategy, but the opportunity to deliver on the aims and ambitions of that document has not been taken. Long-term certainty over the direction of the UK's energy system is vital if we are to unlock our renewable energy industry's vast economic potential." However, beyond this date, investors are still in the dark. "This takes you to the mid- 2020s, but beyond that there is a lack of clar- ity," says Molho. "We were expecting much more clarity about how low-carbon projects will be funded through to the 2020s and how the carbon price signal will evolve." The absence of the framework of regular auctions, established by the LCF, will com- pound the lack of confidence among inves- tors. Marshall says developers of projects that require subsidy will have one shot at securing it under the government's frame- work. "There will be one auction and no route to market for, potentially, six years." Parr suspects that ministers may be bank- ing on continued falls in offshore wind prices to get them off the hook. "They're just hoping that renewables will be subsidy-free, so they don't need to give them any support," says Parr, who estimates that anticipated reduc- tions in offshore wind costs could secure double the amount of such capacity through the CfD process. "If it gets cheaper, the amount you can get rises sharply," he adds. Over-reliance on offshore wind brings its own risks in terms of intermittency of supply, though. The lid on low-carbon subsidies lim- its the room for manoeuvre for those seeking to develop technologies such as wave and tidal, which could even out the peaks and troughs in supply from solar and wind. The Swansea Bay tidal lagoon is "very unlikely" to happen under the framework announced in the Budget, reckons Marshall. The lesson the government should be drawing from the fall in offshore wind prices is that upfront support can deliver supply chain savings down the line. "To decarbon- ise cost-effectively and keep growing the supply chain, we need to be able to build on the cost reductions in offshore wind," says Molho. "The Budget doesn't stop that but it's not clear how it will help it, either." And the Budget offers few clues for tack- ling the wider problem about how the UK will renew its rapidly ageing power fleet. "The vast majority of UK power stations are getting pretty old," says Marshall, pointing out that 10GW of nuclear capacity is due to be retired by 2025 on top of the 8GW of coal stations that have to be phased out by then. And the demands on the electrical gen- eration system will only intensify because of increasing demand for electric vehicles and a further shi to electrified heating, says Parr. One source from the renewables industry warns that with or without renewables, we will need to replace these old plants. "It's difficult to see how that will all be plugged through gas: there is an element of storing up problems here."

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