ESRC ENERGY RESEARCH CONFERENCE
March 31 2003
PROJECTS AND POLICIES FOR STEP CHANGES IN THE ENERGY SYSTEM:
DEVELOPING AN AGENDA FOR SOCIAL SCIENCE RESEARCH
STEP CHANGE IN THEORY AND PRACTICE
Dr. Catherine Mitchell
Warwick Business School
Dir.tel: 02476 524985
With comments from Discussants
Michael Laughton and Nick Hartley
following the paper
The UK has had a renewable energy research and development (R&D) programme since the 1970’s and a demonstration programme from the 1980’s. However, it was not until 1990 that a market delivery programme for renewable energy technologies was introduced – the Non Fossil Fuel Obligation (NFFO) for England and Wales1. In 2002, a new market delivery programme was introduced along with a higher expenditure on capital grants: the Renewables Obligation (RO) and a Scottish Renewable Obligation (SRO)2. So far, these mechanisms have led to renewables deployment rising by around 1% of electricity over the last twelve years.
The Government has a target of renewables supplying 10% of electricity by 2010. The recent 2003 White Paper on Energy3 has also stated its goal of reducing carbon dioxide emissions by 60% by 2050 from 1990 levels and its aspiration of renewables supplying 20% of electricity by 2020. Thus, the Government’s goal is a step change for the energy system and envisages that over a 20 year period renewables will move from being a very marginal presence in the electricity system to one providing one fifth of electricity demand.
This paper has been asked to address the following four questions:
What step change contribution to the energy system could be made by renewable energy?
How much would this cost?
What are the necessary technical, social and economic (including policy) changes necessary to achieve this step change?
What still needs to be researched and understood to ensure that renewables can make the step change?
Authors are not expected so much to provide absolute answers but to tease out sub-questions which could provide the basis for an agenda for research. Areas which appear to need further work are raised throughout the document and brought together in the final section. This paper does not go into great detail, rather it presents references to important pieces of work or analyses which have already been undertaken. It is set out in the following way:
It briefly introduces the type of renewable system we might have in 2010, 2020 and 2050.
It provides a short overview of renewable energy policy in the UK.
It briefly reviews the costs of meeting various renewable energy targets and compares the UK’s renewable energy policy to other countries renewable policies and deployment levels
It sets out the theoretical literature on technology system transformation
It attempts to link theory and practise by asking a number of key questions raised from the theory
It makes recommendations for the Social Science Agenda
2. 10% by 2010; 20% by 2020; 60% carbon cuts by 2050 – Timescales and Step Change
‘Step Change is here used to mean a radical increase in the rate of decarbonisation such that UK carbon emissions may be projected to fall by some 60% by 2050’4.
The above definition for ‘step change’, which was one of the recommendations of the Royal Commission of Environmental Pollution’s Report5, is used within this paper. The White Paper has accepted the RCEP’s recommendation.
What such a step change translates into in terms of technologies and fuels is clearly set out in Chapter 5 of the PIU’s report6. This paper would argue that policies currently in place are very limited compared to the changes required to meet the vision and aspirations of the White Paper. The current targets are for renewable electricity to provide 10% of electricity by 2010. Over the same period, the White Paper has announced more energy efficiency measures and combined heat and power (CHP) capacity is expected to rise with the White Paper committed to at least 10 GW of CHP by 2010. Micro CHP will increase deployment with implications for the interaction of gas and electricity networks but also the way that domestic customers interact with their energy use. In this situation, the rate of deployment of renewables will have to increase significantly (see Section 3) but although the electricity network characteristics may change somewhat, it is possible to imagine that there will be limited changes to the energy system by 2010.
In order to meet the White Paper vision7, at least 20-30% of the electricity system needs to be supplied from renewables by 2020. Moreover, a far greater percentage of heat demand and energy for transport (ie biofuels/hydrogen) should be provided from sustainable sources, as described by the background analyses of both the White Paper and the Energy Review. This is likely to be linked to different ways of designing, managing and operating networks, markets and demand, made possible by information technologies8. Strbac and Jenkins describe how 10% of the electricity demand supplied from renewables could be connected to the distribution network with limited change. However, by the time 20% is reached, renewables need to be integrated in to the day to day design and operation of the electricity network9.
In this latter situation, the proportion of sustainable technologies to fossil/nuclear generation; the type of technologies and energy sources (supply, demand, control, electricity, heat, liquid), their scale (watts to megawatts of electricity; equivalents of heat), their position (in houses or far offshore), their operational characteristics; and markets can be expected to be very different. The design and operation of such an energy system, its integration between its constituent parts and its regulation can be expected to alter as well. In this way, not only would the rate of deployment of renewables require a step change but the wider energy system itself will have had to accommodate the step change, in itself altering or transforming the energy system. This broad area – or the step change – needs to be understood in far greater detail.
Arguably, the 2050 renewable energy system as set out in the background documents to PIU and the White Paper10 appears more likely to be an expansion of the 2020 vision: more renewable electricity supply, more heat provided from renewable sources; increasing levels of biofuels; more domestic heat and power. The big difference revolves around changes to transport technologies and fuels11.
What changes need to be achieved in the (renewable) energy system, and by when, in order to achieve a self-sustaining energy system by 2050. Do these changes have to happen in order (ie incremental change), in which case what order, or simultaneously (holistically) 12? What are the major constituents of this step change? Will they have to have occurred by 2010 or 2020 rather than by 2050? In other words, will, for example, economic, social and regulatory policy changes have to occur early on so that the technical changes can come through later or is step change a linear path13. Moreover, the UK needs to be reaching this self-sustaining path in as efficient and least total cost manner as possible. We need to understand what a least total cost path is and how we measure it. We also need to understand whether the point at which we are starting down from, the renewables obligation, capital grants and R&D, is the right one.
3. A Short Overview of Renewable Energy Policy in the UK
To be able to tell whether the UK is on the right path to achieving a step change in renewable deployment, we need to understand how renewable energy policy works in the UK14. This section provides a very brief description.
Renewable energy was supported in the UK since 1990 by the Non-Fossil Fuel Obligation with a target, set in 1994, to supply 3% of electricity by 2000. The NFFO was successful in bringing prices paid to renewable energy projects down rapidly but had two key problems: (1) the seeming inability to deliver deployment and (2) its separation from the electricity trading market in that generators were paid a price per kWh by regional electricity companies which were also obliged to take the generation. The remit of any delivery mechanism which followed on from the NFFO was to maintain the positive competitive and price reducing aspects of the NFFO but also to overcome the problems associated with it Thus, the two fundamental goals of the Renewable Obligation (RO) which took over from the NFFO in 2002 was:
to increase deployment whilst at the same time maintaining a competitive incentive to keep prices down;
to enable (force) renewable generators to become more integrated into the electricity market