Death of the Feed-in-Tariff
The Feed-in-Tariff was first introduced in the UK in April 2010 to act as a financial incentive for homes and businesses to take up renewable energy. Succesful applicants receive a payment for the clean energy they produce receiving a guaranteed fixed price, indexed for inflation for 20 years.
The Feed-in-Tariff (FIT) has been extremely successful at encouraging the take up of renewable energy. Most installations in the UK could not have happened without it.
Unfortunately, the FIT subsidy is set to end in April 2019. As set out by the Government in the 2017 Autumn budget, “there will be no new subsidies for renewables until 2025”.
So what does this mean for the future of renewables in the UK? Thankfully, a dramatic fall in costs since 2010 means that access to solar power is much more affordable than it was. As the costs to store energy using battery power technology decline the time is approaching where there will be no need for subsidies after all, though making this happen by April 2019 will be a challenge.
As the Feed-In-Tarff subsidy dimishes over the next year, solar power installers will be looking to use battery storage as a way of making new projects work financially. Being able to charge a battery with solar power means the electricity does not need to be consumed at the point of generation, instead it can be used when it’s needed, day or night. This could prove to be just the catalyst needed for wide-scale clean energy deployment.
Combining battery storage with renewable energy will unlock the door to using clean energy sources around the clock putting the final nail in the coffin for fossil fuels in our energy supply. Furthermore, in the same way that solar and wind power costs have plummeted, we can expect the price of battery storage to fall as production techniques improve and economies of scale take hold.
With falling costs, home storage is seen as increasingly attractive in the UK, particularly to early adopters, being the 850,000 homes with solar panels. The Tesla Powerwall, perhaps the best known energy storage battery, has recently become available in the UK, soon be challenged by a British made Nissan battery. Other British manufacturers are Powervault and Moixa. There have even been suggestions that electric vehicle batteries can be connected to the grid to sell extra power at peak times, adding another incentive to becoming an EV owner.
The energy market is certainly set for some rapid and profound changes in the years to come. In the last part of our Energy Trends blog series, we’ll look at the emerging popularity of heat pumps and how smart meter will change the way we buy power.
05 May 2016
Have you heard about smart meters? Three million have already been installed in the UK, with plans to fit a total of 53 million of them into 30 million businesses and homes by 2020. Smart Energy GB (the national campaign promoting the rollout) has just launched a campaign to raise awareness on television. Many concerns have been expressed about the £12 billion programme, such as potential health and privacy implications, as well as doubts about the true benefits and cost. Over the course of this blog, BHESCo examines the pros and cons of this new technology, and asks if this enforced rollout is really in our national interest.
Benefits And Cost Concerns
The original idea for smart meters started in an EU mandate which said the rollout should only be undertaken by member states should it provide economic benefit. The rollout is funded by the consumer, as energy suppliers will pass on the cost through their bills, estimated at £500 per person. Last year, Smart Energy GB spent more than £15 million on its campaign to encourage the uptake of smart meters. It is questionable whether funding for the campaign is providing value for money for the bill payer, compared with other energy investments. For example, the total amount spent on the FIT and RHI, has been capped to £75 million to £100 million per year, for the generation of clean, renewable energy to keep the lights on.
Smart meters send remote readings of your energy usage to your energy supplier, meaning people no longer have to submit meter readings or receive estimated bills. The benefit of accurate bills would be invaluable should the process be infallible, which unfortunately, it is not. The requirement for constant two-way transmission from the meter to the energy supplier is part of the cost of the service and will increase your energy bill, plus it is questionable whether any savings will be made from reductions in your energy consumption. The rollout makes it mandatory for communications service providers, like BT to provide 100% WAN coverage. The cost of this coverage will be paid by the energy suppliers. BHESCo believes there is considerable question as to the cost benefit of the smart meter rollout programme to the consumer. Smart meters are designed to smooth out peaks in demand by introducing “Time Of Use” tariffs. This demand management process only works if the take up of Time Of Use tariffs is high. The Daily Mail projects that the energy suppliers will charge more at peak times, meaning that electricity and gas used in the evenings could cost 99% more than at other times.
As part of the national rollout you will get a smart gas meter, a smart electricity meter, a smart meter display and a communications hub. The communications hub will link the system to a similar wireless network outside your home. According to Smart Energy GB these smart meters will give you more control over your energy use, help you understand your bills and allow you to see what the energy you use is costing. They claim that smart meters will benefit Britain as a whole, and are just the first step in a major infrastructure upgrade that will total £100 billion of investment. Supporters claim that smart meters will help make it easier to switch suppliers creating more transparency in the industry.
The wireless radio wave frequency radiation emitted by the communications hub to the energy supplier, and from the energy meter to the smart meter display, have been identified as a potential health risk. The type of radiation emitted by such devices is classified as a class 2b carcinogen by the World Health Organization. A significant number of complaints have been lodged with physicians in countries where smart meters have already been installed, ranging from problems falling asleep and staying asleep to chronic fatigue, headaches, migraines, vertigo, tinnitus, unhealthy blood pressure levels, concentration and memory problems, learning and behavioural disorders and a more frequent incidence of ADHD among children. And humans aren’t the only species affected; all of nature is damaged by radio wave frequency radiation. The most widely publicised harm has been experienced by bees (colony collapse), birds (dwindling numbers of migratory species) and trees (sudden oak death and ash die back). Unsurprisingly, such information about the health implications of smart meters has been ignored by Smart Energy GB in its promotional campaign. In fact, the televised adverts don’t really say anything about what a smart meter actually is or does:
The ever-present challenge of making a clear cause and effect link between smart meter radiation and the impact on health means that it is wise to proceed with caution. We need to admit that we do not have enough medical information to proceed with such a rollout and should wait until there is satisfactory evidence that the technology is safe. Until this happens, it is better to limit the exposure of households to radiowave radiation. History has shown us the dangers of introducing new inventions without sufficient knowledge of health impacts, notable examples include the use of DDT, Thalidomide, X-ray, smoking, asbestos, heavy metals, and uranium exposure. In all these cases, communities were exposed to new products before the science was completely understood.
Smart DCC Ltd is responsible for the smart energy code. Its officers are representatives from the large energy companies. There are no consumer groups like Citizens Advice on their management committee. According to an investigative report done by the Daily Mail, smart meters could be used to spy on your home. Data collected by the smart meter could be used by marketing companies to reveal how people consume their electricity and gas. Privacy and data protection are important individual freedoms. With Smart DCC Ltd being run by the large energy suppliers, there are issues concerning the confidentiality of our consumption data that have not yet been sufficiently safeguarded by regulation.
We believe that smart meters are the way forward for creating efficient consumption of local, distributed energy generation. While BHESCo supports the use of smart meters in initiatives like Energy Local (http://www.energylocal.co.uk), we believe that the meters should be connected to fibre optic networks, where any potential health risks caused by wireless radio waves may be overcome, where participation is completely voluntary and where privacy is ensured through confidential, protected data networks. The impacts of radiofrequency electromagnetic radiation must be tested and understood before a rollout of this scale is undertaken. We are surprised that the programme is ignoring the health impacts of wireless smart meters entirely. We also believe that £12 billion would be better spent on modifications to distribution networks, where there is no capacity to connect new local renewable energy generation. This is prohibiting the growth of renewables, holding back economic resilience.
The solution is simple, however, more costly: Using the UK’s fibre optic network to communicate the signal instead of the envisioned wireless network would This could be rolled out in a smaller, more localised campaign, in conjunction with Energy Local campaigns.
 http://www.bbc.co.uk/news/business-35894922 /
 http://freiburger-appell-2012.info/en/observations-findings.php?lang=EN and http://www.naturalscience.org/wp-content/uploads/2015/01/wfns_brochure_microwaves-bees_english.pdf
15 Oct 2015
In the past few months, we have seen some challenging developments in the renewable energy sector. Two key announcements from the Government have stripped away the stabilising wheels for clean energy, removing some of the incentives on which the industry has relied, making it harder to progress. The reasons were effectively that prices for renewable energy has come down as to no longer require the same level of subsidy that it did five years ago.
The first announcement came in July 2015, when HMRC proclaimed that renewable electricity would lose its exemption to the Climate Change Levy, a tax on the supply of commodities to businesses. Renewables have been exempt from this charge since is was introduced in 2001, providing a subsidy for low margin investments in renewable generation.
The reason given for this change is to “correct an imbalance in the tax system by preventing taxpayer’s money benefitting renewable electricity generated overseas”. However, this logic is refuted by industry insiders who argue that more than 70% of the Levy Exemption Certificates went to UK providers. The removal of this tax exemption could mean a drop in income for some renewable schemes of between 5-6%. Although this may not sound like much, this could mean the difference between sink or swim for some smaller companies, as Dr Gordon Edge of RenewableUK explains:
“Yet again the Government is moving the goalposts, pushing some marginal projects from profit into loss. It’s another example of this Government’s unfair, illogical and obsessive attacks on renewables”
The great irony is that because the renewable industry is nearing price-parity with fossil fuels, and because the Government wants to ensure low energy prices for hard-working families, the requirement of clean energy generators to pay toward the Climate Change Levy will lower their profit margins, meaning they will need to raise prices in order to compensate.
The second measure affecting the renewables industry came from the Department of Energy & Climate Change (DECC), when it announced on 22 July 2015 that it would be removing preliminary accreditation from the Feed-in-Tariff. Pre-Accreditation means giving green energy generators a guaranteed tariff level in advance of a project being commissioned, which is vital for financial modelling and creating investment offers. Removing this guarantee means that energy providers would receive the tariff rate as at the date they apply for full accreditation. In the DECC’s own words, “this will mean that a developer will not be certain of the level of suport they will receive under the scheme until the point at which their application is received by Ofgem”.
According to the DECC, pre-accreditation was introduced to “remove a large degree of risk” and to “offer greater certainty to industry”. The table below illustrates the huge increase of installations deployed under the FiT pre-accreditation scheme since it was introduced in 2012:
So what could be the reason for removing such a successful incentive now? The rationale provided by Amber Rudd, minister of DECC, is that there has been a much greater uptake in renewable energy projects than was forecast. Predictions had been for approximately 750,000 new renewable installations nationwide between 2010-2020, whereas the reality is that there have already been 700,000 installations as of 2015. This has “significantly outstripped expectations”, meaning that budget forecasts for 2020 are no longer workable.
It makes no sense that at the same time we’re told climate change is the fight of our generation, we are being also being told that the UK cannot afford the present pace of renewable growth. Or that energy security is a big national priority, then stop the support for the one area that provides it. It is tragic that just as renewables are challenging fossil fuels for market dominance, their progress has been curtailed. The irony of the green industry being punished for exceeding expectations is absurd, especially at a time when financial incentives for fracking are are on the rise. As David Attenborough said in his recent interview with Barack Obama, to transition to a low-carbon economy all we need to do is make renewables cheaper than fossil fuels, and common sense market mechanisms will do the rest.
However, there is cause for optimism. Given the tremendous advances in the efficiency of renewable technology, as well as the recent growth of solar power in the UK, perhaps Amber Rudd and DECC are right; perhaps the renewable industry is resilient enough to ride without support. And the decision to cut the Feed-in-Tariff has not yet been settled either, with consultations underway (please complete this one by 10:10 here), so if you do feel this is wrong, contact your MP and let them know.
Moreover, even without the subsidies of the past, there are still enormous opportunities to lower our energy bills as well as carbon emissions through energy efficiency measures, such as insulation, draught-proofing, or double glazing.
If the recent developments in the renewable industry have highlighted one thing, its that communities cannot rely on fluctuating external factors if they desire a stable and fair energy supply. To defend our communities against such unexpected changes in the future, we need to take control of our own energy networks, which will ensure resilience and price stability.
And what’s more, we will not be penalised for our successes.