Provisional statistics published by the Department of Energy and Climate Change (DECC) show that in 2015 supply from “low-carbon” electricity, that is, supply from both nuclear and renewable sources, accounted for 43% of UK electricity supply from major power producers, an increase of 7% compared to one year earlier.
Supply from coal-fired generators fell by 24% due to reduced capacity brought about by both an increase in the carbon prices floor and Drax converting a third unit from coal to biomass. Supply from gas-fired generation saw a decrease of 0.5%, but, while supply from coal and gas fell, there was an increase in supply from oil, nuclear, hydro, wind, and bioenergy.
Nuclear output increased by 10% because there were fewer outages in 2015. An increase in rainfall of 16.3% meant that supply from hydro generation rose by 7% year-on-year. Meanwhile, supply from wind rose by 24%, benefitting from an increase in capacity and good average wind speeds, particularly in December when wind output was at record highs. Bioenergy saw a large increase, not only due to the Drax conversion of another unit but also because Eon’s Blackburn Meadows 30 MW biomass CHP plant opened in January 2015.
This increase in supply from hydro and wind means that the amount of electricity used by generators as part of the generation process has fallen by 4%. Coal has a high own use factor, and so less coal-fired generation resulted in a lower level of own use.
While this paints a positive picture for renewables in the UK, much of the new capacity being put in place now is the result of previous government policies that encouraged investment. The future of renewables take-up is less certain because of cuts to UK renewable subsidies and support policies that took place in 2015. Ernst & Young’s (EY) Renewable Energy Country Attractiveness Index, which ranks 40 countries on the attractiveness of their renewable energy investment and deployment opportunities, moved the UK down by four positions over 2015, to finally rank eleventh. E&Y sees 2016 as a “make or break year” for the UK in being able to attract renewable investment going forward.
Although renewable energy companies are increasingly operating globally, investment is impacted by policy at a national and regional level. However, it is not all about subsidies, and the E&Y report also considers the transition to subsidy-free renewables and the new opportunities this will create. It underlines the requirement for governments to create conditions for competition and innovation, and for the market to reflect externalities such as emissions via carbon pricing. It also highlights the importance of a level playing field.
There is currently a debate in the UK over the future of the Carbon Price Floor, which is intended to act as a top-up to the low price of EU Allowances. The tax is only applied to generation and industry in the UK, which means emissions are more expensive in the UK than in the rest of Europe. While industry points to this as making them uncompetitive, some energy companies support the Carbon Price Floor as an efficient means of encouraging a switch to low-carbon generation. An announcement on the Carbon Price Floor, and whether it will be frozen or continue to escalate, will be announced in the budget on 16th March.