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< How much microgeneration can networks take? | One Minute Interview: Kim Challis, G4S Utility Services >
Why we should take a pan-utility approach to renewables
Getting it together: water and energy concerns overlap
Water and energy companies need to work together on renewables, according to participants at a round table organised by Utility Week and MWH.
Sarah Rhodes is the acting director of the Office for Renewable Energy Deployment at the Department of Energy and Climate Change (Decc). As such, she is one of the officials at the sharp end of the UK's plans to stop using fossil fuels and become an economy with radically lower carbon dioxide emissions.
Rhodes set out the scale of that challenge at an invitation-only round table for energy and water companies organised by Utility Week with the support of MWH. She pointed out that current policies are designed to deliver 80TWh of renewable energy by 2020, but we need 240TWh. "That's a threefold increase on last year," she said. "And from a very low base of only 2 per cent of our energy currently coming from renewable sources, and just 5 per cent of electricity."
Green targets
By 2020, she said, "around 30 per cent of our electricity supply must come from renewables, and so must 12 per cent of our heat and 10 per cent of our transport fuels". As for the barriers to delivering those goals, she said "we need to improve the returns on investment. Even with a high cost of carbon we need to improve revenue streams".
Giving an investor's viewpoint, Ian Temperton, managing director of climate change at Climate Change Capital, said one reason why the switch to renewables made investment tougher was the profile of that investment.
Renewables had a high capital cost and low operating cost, compared with, for example, gas turbines, which are relatively quick and cheap to build but where there are later fuel costs. Much more renewables investment had to be raised in advance. "Up until now most energy investment has been about 'stuff' [ongoing fuel costs]; now it is about 'things', and they cost up-front," he said.
Capex requirements
He put the capital investment required at £100-£150 billion but was optimistic about raising it despite the downturn. "It's not about the credit crunch. That investment always will be an order of magnitude bigger than utilities' regular funding. The crunch has just brought those issues to the fore," he said.
Water companies are large energy users, with some potential to become renewable energy generators from various sources. Research by MWH revealed how important it was to water and energy utilities that they worked together to maximise those opportunities, for example by making use of the waste arising from processing sewage. That was not helped by differing approaches between the two industries' regulators, Ofgem and Ofwat. It was suggested that water companies could solve regulatory issues by passing renewable energy projects over to specialist developers, but the companies were keen to take an active part. To do that, they wanted a framework within which they could share information on projects.
Subsidies
Both sectors were keen to understand what the implications would be of new subsidies, particularly the Renewable Heat Incentive and the feed-in tariff for small-scale generation. Rhodes could not give too many clues about those measures, which are not expected to be out for detailed consultation until next year. One concern was that there was a gap in the regime: the feed-in tariff would cover projects up to 500kW, but there were good technologies sized rather larger that would be of interest to companies such as water utilities. They would not be supported.
Also of concern was the imminent Carbon Reduction Commitment (CRC), which will come into effect in April and will pit water companies against other energy users, including commercial and public sector organisations. Representations from water companies pointed out that they had consistently tried to improve energy efficiency, but they were hampered in reducing energy use because they had to fulfil the requirements of a range of other bodies, such as the Drinking Water Inspectorate and Environment Agency. Far from driving energy efficiency, the CRC was a distraction, and one that introduced opportunities for gaming, they said.
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