Limping 'progress' on green energy

The Department of Trade and Industry has claimed that "very good progress" has been made towards the goals of the 2003 energy White Paper. But CO2 emissions and energy consumption remain on an upward path, and renewables and combined heat and power (CHP) are still off track for 2010 targets.

The second annual report on the White Paper points to "pillars of energy strategy" which were achieved in 2004/5.1 These include the launch of the EU emissions trading scheme, establishment of the Nuclear Decommissioning Authority, extension of the renewables obligation to 2015 and creation of a single British electricity market.

Security of supply is a strong theme in the report, as the UK became a net importer of fuel for the first time since 1992. Measures to prop up growing reliance on imported gas include an agreement with Norway to open up new pipeline capacity and investments in liquefied natural gas terminals.

Despite this progress there is little sign of a shift towards the promised low-carbon economy. Official data suggest that in 2004, CO2 emissions were just 4.2% below 1990 levels (ENDS Report 363, pp 3-4 ) - way off course for the target of a 20% cut by 2010.

Calculations by Friends of the Earth suggest that things will get worse this year. Using DTI statistics on energy consumption for the first five months of 2005, FoE reckons that emissions for the period increased by 1.8% compared to 2004. Using the Government's weather-adjusted figures, emissions rose by 2.5%.

Even so, the annual report claims that the White Paper's emissions reduction goal was "partially" completed. The DTI points to the ongoing review of the climate change programme as an opportunity to "put us back on track" and recognises that "more needs to be done".

The report also claims "partial" success for the Government's aims on international climate change policy. This reflects the ratification of the Kyoto Protocol last year, although prospects for a successor agreement remain uncertain.

The increase in emissions is fuelled by a continued increase in primary energy use. According to official energy statistics, also issued in July,2 consumption in 2004 was 0.8% higher than in 2003. Electricity demand was 1% higher, although a steep rise in imports meant that generation in the UK fell slightly.

The report admits that fossil fuel dependency "increased in 2003 and 2004". Gas imports rose to record levels, partly to supply three new gas-fired power stations operating at high load. Coal imports fell by 2.6%, after increasing in the previous two years, but have been increasing in 2005 in line with rising gas prices.

  • Renewables: Electricity generation from renewables rose by 33.2% to 14,171GWh. Much of the improvement reflected a 53% increase in hydropower, after dry weather in 2003. Most hydro does not qualify for the renewables obligation, the mechanism that aims to increase renewables' share of the market to 10.4% by 2010.

    Sources qualifying for the obligation provided 3.1% of the UK's power in 2004, up from 2.2% in 2003. The improvement still left a considerable shortfall against the obligation targets of 4.3% for 2003/4, and 4.9% for 2004/5, and faster growth will be needed to stay in touch with the rising profile of the obligation.

    The improvement in 2004 was due to increases of 728GWh from landfill gas (up 22%), 650GWh from wind (up 52%), and 420GWh from co-firing biomass with fossil fuels in power stations (up 70%). Landfill gas is still the largest contributor to fulfilling the obligation.

    Meanwhile, data from Ofgem show that overseas generators are benefiting handsomely from exemptions from the climate change levy.3 The exemption for imported electricity - mostly from existing hydro and tidal schemes in France and Norway - was worth some £15.5 million, roughly one-quarter of the total subsidy.

    In previous years, almost all of the subsidy has been claimed by French utility EDF - raising concerns that electricity from predominantly nuclear sources had simply been rebadged as renewable to cash in on the tax break. In mid-2004, however, French renewable exports fell to a trickle - presumably because EDF was chasing subsidies elsewhere in Europe.

  • Combined heat and power: The CHP Association was disappointed that the White Paper report claims partial completion of the commitment to develop CHP to reach 10GW of installed capacity. Head of research Syed Ahmed notes that a significant increase in CHP output in 2004 "was due to one very large scheme. It doesn't reflect a healthy market because there are no new orders." Apart from that scheme - ConocoPhilips' new 730MWe plant - CHP output has barely risen since 2000.

    Ahmed said the CHP strategy published in 2004 "was several years too late and added insult to injury. It said we would not reach the target with existing support mechanisms, but offered no new measures." CHP is expected to fall about 20% short of the target.

    Renewables and CHP have also been affected by consolidation of market power. The proportion of generation by the top nine companies in the UK has risen from 71% in 2001 to 77.6% in 2004. Green energy was expected to present an opportunity for new smaller companies but they face significant barriers to entry and so far make up just 0.5% of the market.

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