Official government projections could reveal an exciting shift in the UK’s plans to decarbonise its power grid
Is the government quietly preparing for a surge of renewable energy development from the mid-2020s onwards as the cost of clean technologies continue to fall and decarbonisation of the economy gathers pace?
That is the question prompted by energy and emissions projections released by the Department for Business, Energy, and Industrial Strategy (BEIS) earlier this week, which suggest officials have significantly upgraded their expectations for renewable energy deployment beyond 2020.
The renewables industry had been hoping the government would announce how it intends to support clean energy development beyond 2020 in last week’s budget, but the Treasury simply confirmed it would replace the current Levy Control Framework clean energy spending cap with a new set of controls, while declining to provide further details.
The lack of policy certainty has left many energy industry insiders frustrated, with experts fearing the pipeline for new renewables and nuclear projects will dry up over the next few years without urgent clarification on the post-2020 policy environment.
Observers hope clarification will come in the government’s imminent Emissions Reduction Plan, which is expected to set out how ministers intend to meet the UK’s carbon targets through to the early 2030s.
However, this week’s updated energy and emissions projections for 2016 could provide an insight into the government’s thinking, confirming that its ‘reference scenario’ has been changed in the past 12 months to include significantly higher levels of renewables capacity and lower than previously expected levels of unabated gas power and carbon capture and storage (CCS) capacity.
The report stresses that “beyond 2020, the scenario presented here is illustrative and includes assumptions that may go beyond current government policy”. It also notes that “there is significant uncertainty over how the tools available for system management would adapt to changes in generation mix, and these outputs should be viewed as illustrative”.
However, annexes to the report reveal the projection for cumulative new build renewables capacity from 2016 to 2035 now stands at 45GW, marking a sharp increase in the 2015 projection for 33GW of new capacity.
Short to medium-term projections are more mixed, with the report suggesting new build renewables capacity in 2021 will be 16GW, representing a small decline on the 18GW projected a year ago, presumably due to the current delay in confirming price support levels beyond 2020.
However, from 2024 onwards – the year BEIS predicts the UK will generate no coal power for the first time since the industrial revolution – predictions for renewable power capacity have been upgraded, with 34GW of new build expected by 2029, representing a sharp increase on the 25GW previously expected.
In contrast, the government is predicting significantly less power will come from new build gas and CCS projects than previously expected. The reference case predicts new build natural gas plants will deliver just 15GW of capacity in 2035 with gas as a whole providing just 35TWh of power, compared to 176TWh from renewables and 135TWh from nuclear. In contrast, 2015’s projections put cumulative gas new build at 27GW.
Similarly, CCS is now expected to provide just 1GW of capacity in 2035, compared to a previous expectation of 8GW. Carbon Capture and Storage (CCS) is not assumed to come on in any significant capacity over the period of this modelling,” the report states. “In the 2015 projections, CCS generation had been assumed from 2025. The government’s approach to CCS will be set out in due course.”
The report suggests interconnectors and energy storage are also expected to play a bigger role than previously thought by the mid-2030s as the UK shifts to a power system dominated by renewables and nuclear.
The surge in clean energy development is expected to build on a trend that will see low carbon power account for 61 per cent of generation by 2020. It is also expected to enable deep cuts in carbon emissions from the power sector, continuing a trend that has seen emissions from power stations fall 35 per cent between 2010 and 2015.
In addition, the report predicts overall emissions and energy use in 2035 are both likely to be slightly lower than previously thought.
Renewables industry insiders welcomed the news and suggested they were a result of the rapid reduction in the cost of renewables in recent years. “Offshore wind is going to be a lot cheaper than expected,” said one industry source. “If you had £700m to spend previously you thought you were going to get about four projects out of that, but now you can see how would could get seven projects at £100m each – you are going to get a lot more for your money.”
BusinessGreen understands the government’s updated projections also include an assumption that by 2030 an additional 10GW of small-scale solar will be deployed without subsidy, as costs across the industry continue to fall and storage technologies improve the return on investment for domestic installations.
The projections will also further fuel speculation that the government could look to provide a new route to market for cost effective onshore wind and solar farms beyond 2020. Industry insiders are arguing that with the Scottish government keen to build new onshore wind farms and solar costs continuing to fall it may be possible to introduce new ‘cost neutral’ price contracts that honour the government’s pledge to ‘halt’ subsidies for onshore wind farms.
Hugh McNeal, chief executive at trade body RenewableUK, said the upgraded projections were “testament to the remarkable development of UK renewables in the last decade”.
However, he warned the projections can only be delivered if the government delivers much-needed long-term policy certainty for the industry.
“Government is right to identify renewables as our main opportunity to deliver secure, cheap energy in future – but they do need to take steps today to realise it,” he said. “Renewables should have a leading role in their Industrial Strategy and the Emissions Reduction Plan, to help capture the massive industrial benefits they are bringing to areas as far apart as Cornwall and Hull. Government must also make sure it procures our future energy mix with an eye on value for money – it is vital for UK consumers that cheap, essential power sources like onshore wind have a route to market.”
Writing on Twitter, McNeal’s colleague Emma Pinchbeck said the renewables industry was making a growing contribution to UK energy security.
NEWS: Renewables trusted by Gov to “keep the lights on”, in place of gas, which they don’t think will be delivered. You’re welcome. https://t.co/6yO52Z3Fln
— Emma Pinchbeck (@ELPinchbeck) March 16, 2017
The BEIS projections were echoed this week by the Committee on Climate Change’s latest report on the impact of low carbon policies on energy bills. Speaking to Carbon Brief, Mike Thompson, head of carbon budgets for the CCC, said the analysis was based on a “high renewables” scenario through to 2030, because alternative “high nuclear” or “high CCS” scenarios “don’t look like the front runners”.
Clean energy developers will now be waiting eagerly to see if the government’s imminent Emissions Reduction Plan and promised new controls on energy subsidies back up its projections for the energy market.
A BEIS spokeswoman confirmed the a commitment to delivering clean energy would underpin the government’s new Industrial Strategy and wider plans. “Through our ambitious Industrial Strategy Green paper, we are committed to ensuring the supply of secure, affordable and clean energy for businesses and households,” she said. “Keeping a close track of our energy and emissions estimates allows us to implement our clean growth plans more effectively.”