Executive Summary

As outlined above, if we are to meet our 2020 goal, up to 30-35% of our electricity may need to come from renewable sources.  Today that figure is less than 5%, made up mostly of biomass, hydro and wind (see Figure 3).

Figure 3: Electricity generated from renewable resources – Comparison between 2006 and estimated 2020 sources

Source:  DUKES 2007 for 2006 figures.  2020 estimates from Redpoint-led modelling – note 2020 figures are for GB only.

As shown in Figure 3, we expect the key growth area to be wind power, both on and offshore. Analysis on electricity constraints suggests that up to 33GW of offshore wind might be achievable by 2030.  However, our initial modelling suggests that by 2020 deployment may be closer to 14GW compared to less than 1 GW today.  This would equate to around 3,000 extra offshore turbines of 5 MW.  Others have suggested that higher levels might be achievable – for example, RAB estimated that around 18 GW of offshore wind could be deployed by 2020. BERR is undertaking a Strategic Environmental Assessment (SEA) to assess the feasibility (economic, technical and environmental) of proposals for up to a further 25 GW of offshore wind on top of the 8 GW already planned.  We want to make full use of the potential for offshore development.

Our initial modelling suggests that we might need approximately 14 GW of onshore wind too, compared to 2 GW today – equating to around 4,000 new 3 MW onshore turbines, in addition to the approximately 2,000 turbines already installed.   Others have estimated a slightly lower level of onshore deployment, for example, RAB estimated that around 13 GW of onshore wind could be deployed by 2020.   Subject to planning permission, we would expect that a large proportion of this onshore wind development will take place in Scotland.  Tidal barrages and lagoons, such as the options being discussed in the Severn Estuary, could also make a key contribution if they are able to meet environmental assessment, economic and other criteria.

The level of renewables deployment in the UK has historically been low, largely due to the availability of cheap alternative energy sources - particularly North Sea oil and gas. While the Renewables Obligation has provided a strong financial incentive mechanism since 2002, several non-financial constraints have inhibited and slowed renewables deployment.  These include, in particular, planning issues (including conflict with other Government policies); access to the electricity grid; and supply chain constraints. In this consultation we would like to hear your views on our proposals to address each of these issues, as set out below.

Financial Incentives

The current financial incentive to produce renewable electricity comes from the Renewables Obligation[1] (RO), by which in effect electricity suppliers must obtain a specified and increasing proportion of their electricity from renewable sources. Since it was introduced in 2002, the RO has increased the level of RO-eligible renewable generation in the UK from less than 2% in 2001 to around 4.4% in 2006.  Under measures set out in the Energy Bill, it is estimated that the RO will lead to around 14% of our electricity being generated from renewable sources by 2015-20.

To meet the EU 2020 renewable energy target, however, we will need to at least double this figure. This consultation examines various alternative ways to provide the financial incentive for this, including  strengthening the RO or introducing a new scheme such as feed-in tariffs (which guarantee renewable generators a fixed sum per unit of electricity generated).  Our analysis indicates that, while feed-in tariffs could in some circumstances have theoretical financial advantages, these benefits would be within the margin of modelling error and would be small for the scale of deployment required.  More significantly, it is unlikely that a new system of feed-in tariffs could achieve the target by 2020, due to the delay and uncertainty which a change of support scheme (which could take several years to introduce) would necessarily entail.  There could also potentially be difficulties in the operation of feed-in tariffs in the UK’s market-based system.  This document therefore concludes strongly in favour of maintaining the RO for large-scale electricity, while recognising that we need to continue to improve its efficiency. The RO will nevertheless need modifying, including significantly increasing the level of the Obligation (e.g. 30%-35%), and extending its end date.  On the assumption that the RO is maintained, we would like your views on any further changes required.

This document also considers the most appropriate financial incentive for the microgeneration of electricity (see Section 5 below).

1 The Renewables Obligation covers England and Wales. Scotland and Northern Ireland have their own Renewables Obligations. [back]