The good news is that renewables now supply nearly 30% of UK electricity and the UK’s attractiveness to renewable developers has improved. In Ernst and Young’s latest Renewable Energy Country Attractiveness Index, the UK has moved up three places in the global rankings since October 2017 to hit seventh place – a ranking it last held in September 2014. This has in part been put down to the fact that some projects are now said to be able to generate returns on subsidy-free projects.
That’s not just the case for some large PV projects but also, it seems, for wind farms. The first subsidy-free on-shore wind project has been agreed. It’s an 18 MW extension to an existing 18 MW scheme in Yorkshire.
However, some see these examples as exceptions, only available to developers in special circumstances, e.g. where an existing scheme can cross-subsidise a new one. Certainly the wider investment picture looks grim – clean energy investment in the UK fell 56% last year and the Environmental Audit Committee’s chair said that “a dramatic fall in investment is threatening the government’s ability to meet legally binding climate change targets”.
Alan Whitehead, Labour’s shadow minister for energy and climate change, commented: “It’s clear there is a substantial downward trend in new investment, which is across the board in terms of investment in clean technology ranging from big wind farms right down to the effective collapse of the solar market”. With on-shore wind and PV blocked, “if anything, the country is beginning to introduce a ‘hostile environment’ for green investment for the future”.
It is certainly true that support for on-shore wind and large-scale PV has been significantly curtailed by the government. In answer to a Parliamentary question on 25 May, energy minister Claire Perry, reiterating the Conservative election manifesto position, said that “we do not believe that more large-scale onshore wind is right for England”. Tough planning controls have been imposed, and large on-shore wind projects have been blocked from getting support under the CfD system. It’s the same for large solar farms.
This is all a little odd given that the government’s latest survey of public attitudes shows overwhelming support for renewables, particularly solar (87%) but also for on-shore wind (76%). That is not to say there is no local opposition to some projects, e.g. to a proposed wind farm with to 200-foot tall turbines, but then, as developers look to large, more profitable turbines to win in the tighter subsidy-free market now established, that’s perhaps to be expected.
However, being optimistic, even though it will be hard for most new on-shore wind and PV projects to get into the market without a CfD contract, even one at zero subsidy level, that could change as costs fall. Analysis by Aurora suggests that 9 GW of solar, 5-6 GW of on-shore wind and 3-4 GW of off-shore wind could be built without subsidies by the end of the next decade, with PV and on-shore wind reaching grid price parity in the early 2020s, and off-shore wind getting there in the late 2020s or the 2030s.
The 10 MW Clayhill solar farm in Bedfordshire claims to have already managed to go ahead without subsidy, though its finances have evidently been aided by cash flow from/the asset status of an existing project on the site, while Hive Energy and Wirsol Energy have unveiled plans to build the country’s biggest ever solar farm (350 MW) in Kent, without any subsidies.
Falling costs are, of course, good news, hopefully enabling projects like this to go ahead, but there can be a market downside. A Cornwall Insight study warns that a surge in renewables capacity, stimulated by competition-driven falling costs, could potentially push wholesale power prices down to such an extent that it reduces the incentive for future investment in the renewables sector. It’s a competitive race to the bottom with only the cheapest surviving and not many of them, so the whole thing slows. A gloomy prognosis.
However, that doesn’t have to happen if the market expands, and we do need more capacity. What’s more, there are some other possible ways forward, including direct power links to some users, outside of normal grid power market arrangements (avoiding grid transmission and distribution costs), as well as some interesting repowering investment opportunities – upgrading wind projects with new turbines. That could boost UK generating capacity by over 1.3 GW, according to the Energy & Climate Intelligence Unit. That says “it makes sense to repower sites of the earliest wind farms, which tend to be in locations that have the best wind resource…existing infrastructure including network connections can also be reused or upgraded at costs lower than for new sites”.
So what happens next? For its part, the government has said that it will not be offering any subsidy support for new renewables until 2025, apart from one new £557 million round of the CfD, which is likely to mostly be taken up by offshore wind, which it favours. The focus on offshore wind has certainly been remarkable, since it was initially so expensive. But since it has involved large investments from foreign companies, and offshore wind projects are getting cheaper, that probably explains most of the UK’s rise up Ernst and Young’s attractiveness index. However, that means that, unless things change, on-shore wind and large PV are out on their own.
There are some on-shore wind projects supported under earlier CfD rounds going ahead, and smaller PV projects can still get support from the Feed-in Tariff system, but that is to end next year. The theory is that these technologies are now market ready and do not need subsidies. We will see. They certainly are getting cheaper around the world. So too is offshore wind. But will that all happen fast enough to ensure that renewables expand at the rate envisaged by the government, which sees them reaching 45 GW, supplying around 50% of UK power by 2035?
Probably not without a bit more help, which after all is what new nuclear is continuing to get, despite it being clearly much more expensive. Nuclear is currently only supplying around 18% of UK power and that will fall as more old plants close. Even if all goes well, the new 3.2 GW Hinkley EDF plant seems unlikely to be running before 2027 at the earliest. Meanwhile, there is talk of the taxpayer being asked to shell out something towards the £13.3 billion needed for Hitachi’s Wylfa project.
Priorities do seem a little skewed, as was clearly felt by those who had backed the now evidently blocked proposal for a 320 MW Swansea tidal lagoon. But at £1.3 billion, that was, it seems, too much to ask for, although to be fair, it was argued that, to get a similar £/MWh return, as a first of a kind project, it would need a CfD at a higher level even than nuclear, and over a longer period. Subsequent larger lagoon projects, in areas with higher tidal ranges, should be significantly cheaper and some see the Swansea project as a pathfinder for them. But not everyone agrees – though, as I write, it’s still not finally decided either way. That is adding to the sense of uncertainty about the future of marine renewables in the UK, for example in relation to the next phase of the (eventual) 398 MW Meygen tidal stream project in the Pentland Firth, which didn’t get support under the last round of the CfD system. Will that be sunk too?