Introduction The Birth of Renewables Policy in the UK

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The waiting resource

The UK has one of the world's best and broadest renewable resources. It has 40 per cent of the entire wind resource of the EU 15 (before the recent expansion), massive opportunities to exploit wave power, potential for the use of forestry and other biomass, and a similar solar regime to other northern European countries. Despite these comparative riches and early programmes to exploit them by successive governments, Britain has lagged behind most of its EU partners in establishing a renewable energy industry, especially in the area of manufacturing. If policies were established and financial resources were made available, how has this discrepancy between intent and delivery come about?

The pressing need to address climate change has not receded, and the resolve of the UK to meet its climate commitments is now bringing about the conditions for the country to start catching up. In fact the UK is one of only two EU countries on target to meet its climate change commitments — although it will only do so if its renewables targets are reached. However, the missed opportunities of the 1990s may mean that manufacturers in Denmark, Germany and Spain will be the main industrial beneficiaries of current and future wind energy deployment in the UK. Furthermore, while other renewables are still very much required, they remain in their infancy. There is much to be learned from previous mistakes if they are not to be repeated.

The cultural context

It could be argued that the UK's inability to fully develop its renewable resources is merely one more example of the country's reluctance to exploit its academic brilliance for the benefit of its manufacturing industry. A popular 'truth' in the UK is that innovative ideas are born in the universities across the country or upon the desks of inventors and entrepreneurs, only to lie ignored by the governments and companies needed to support them. However, as we shall see, renewable energy was identified for backing early on in the European development of many energy technologies. The problem in the UK was not that renewables were ignored, but rather the policy support they received did not work as effectively as was intended.

We shall also see that the political climate was central to the type of drivers that renewable energy received. The renewable policies were established during the first stages of power sector deregulation, a fashion that has since swept through the entire industrialized world. Thus an embryonic renewables industry was established during the most radical change to the management and ownership of the power sector since its inception. The primacy of financial efficiency and the use of the market were not confined to the electricity sector, but were being tried in many different areas — even in natural monopolies such as the train service and water utilities. It was therefore little surprise that a market-based model, even if untested, was to be used as the driver for renewable energy.

Finally, the standing and rights of the individual within the legal culture of the UK became highly relevant in respect to development of the renewables industry. The legal power of landowners and residents at a local level proved to be well capable of thwarting national initiatives and national environmental priorities. The failure to recognize this issue and provide a framework for stakeholder engagement and then a forward-planning resolution may have been one of the most significant oversights.

The pressures for policy and the birth of the NFFO

Prior to the privatization of the UK electricity supply industry in 1990, the Central Electricity Generating Board had undertaken research into renewable generating technologies alongside the Department of Energy. This supported a few pioneering companies in the wind sector, as well as innovation in some British universities. The comparatively small seeds of a potentially thriving industry had been sown.

However, the issue of developing renewables was not high on the agenda when the government turned its attention to selling off the UK power industry. The Conservative administration was keen to implement its ideas on competition in the power sector and the government planned to include nuclear generation in the sell-off. However, as the government's plans were analysed by the financial sector, it became clear at a relatively late stage that private finance would not accept the risks and liabilities associated with nuclear power.

The government was forced to retain the nuclear generation business in public hands while it sold off the other generating assets. However, just as the financial analysis had concluded that nuclear generation was a financial liability, so the government had to find a way to cover the cost of this liability. Thus the idea for the Non-Fossil Fuel Obligation (NFFO) was hatched.

In order to ensure that the nuclear fleet could continue to operate and generate the money needed to cover decommissioning costs, the distribution companies would be obliged to take the nuclear output. Since nuclear generation was more expensive than conventional alternatives, forcing the distributors to buy such power would be anti-competitive and therefore undermine the basis of the new market being established. The answer was to cover the above-market costs of nuclear through charging a tax on all fossil fuels — the Fossil Fuel Levy (FFL). This was effectively the world's first carbon tax.

The levy was imposed on fossil fuel-based power, and set by the independent electricity regulator. Through this mechanism, the government made all consumers pay the extra costs for the 'benefits' of nuclear production by applying a broad carbon tax on the rest of the sector. Of course, the scheme ignored the waste and risk problems associated with nuclear power.

As this drama played out in the late 1980s, environmental issues were climbing on the political agenda, as first ozone loss and then climate change were perceived to be pressing global problems. Margaret Thatcher, a trained scientist, was making speeches on the dangers, most notably one to the Royal Society in September 1988,1 and environmental groups were piling on the pressure. The opportunity was seen within government to extend the use of money made available by NFFO to technologies other than nuclear, that is, renewable energy and thus assuage environmental critics of the government.

At the start, the proportion of NFFO resources made available to renewables was token: over the 1990s, nuclear received £7.8 billion from the Fossil Fuel Levy, while renewables got £400 million. The Fossil Fuel Levy was running at around 10 per cent while it was supporting nuclear liabilities, but dropped to under 1 per cent once only renewables benefited. Nevertheless NFFO proved to be a powerful incentive to a small industry. And by the end of the decade the shoe would be on the other foot, with industries such as wind eclipsing nuclear generation in growth and even price. As the renewable energy technologies expanded, more and more money became available for investment (see Figure 6.1).

The key aspects of the NFFO concept can be identified as follows:

• The UK government would theoretically secure the largest amount of renewable generating capacity for a given cost.

• By giving developers secure long-term contracts, financing would be relatively easy to come by and cheap.

• The price of each technology would be revealed, and through successive competitions, driven down.

• The technology-banding mechanism allotted a predetermined portion of the NFFO pie to each of five renewable technologies. Renewables at different levels of commercial maturity and pricing would not be squeezed out, but would be provided a certain share of the resources.

Source: DTI

Figure 6.1 Renewable generating capacity 1992—2003, including former NFFO contracts (and equivalents in Scotland and Northern Ireland) and capacity outside of NFFO

Source: DTI

Figure 6.1 Renewable generating capacity 1992—2003, including former NFFO contracts (and equivalents in Scotland and Northern Ireland) and capacity outside of NFFO

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Solar Panel Basics

Solar Panel Basics

Global warming is a huge problem which will significantly affect every country in the world. Many people all over the world are trying to do whatever they can to help combat the effects of global warming. One of the ways that people can fight global warming is to reduce their dependence on non-renewable energy sources like oil and petroleum based products.

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