Renewable Energy in the UK

Strategy and Opportunities

Adam BrownSector Champion – Renewable EnergyUK Trade and Investment

Florida

20 November 2008

2

UK Renewable Energy Inward Investment Propositions

Rapidly growing marketWorld leading research

capabilitySupportive collaborative research environment.

Long term vision

Supportive policy framework

Financial and Fiscal Support

Companies with developed

technology, expertise or

operating experience

Companies developing new

technology.

Topics

Some Recent Developments The RO Off-Shore Wind The UK Renewable Energy Strategy

– Targets and Technology Mixes– Policy Measures Needed

Inward Investment Opportunities

Recent Developments

DECC– BERR Energy Team + DEFRA CC Team

Office for Renewable Energy Deployment– Manufacturing Strategy– Focus for “green jobs”– Builds on RETPS

The Climate Change Bill

– Target 80% CO2 reduction by 20504

Growth in UK Renewable Energy Generation

5X increase in New RE in 10 years

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Obligation on electricity suppliers for a growing % of their electricity from renewable energy sources

Level to rise to up to 20% by 2020 and Obligation runs to 2026-27

Accredited Renewables Generators earn Renewable Obligation Certificates for each MWh generated, which can be traded

Suppliers must have the necessary number of certificates at the year end, or else pay a buy out fee (~£35.76/MWh)

Buy out fees are recycled to suppliers who have met their obligation, so increasing ROC value

Generators can secure medium term contracts for supply of power, ROC’s and other benefits

Renewables Obligation….

ROC Values

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Year 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09Obligation % 3.00 4.30 4.80 5.50 6.70 7.90 9.10Buy Out Price (£/MWh) 30.00 30.51 31.39 32.33 33.24 34.30 35.76Recycle Value (£/MWh) 15.94 22.92 13.66 10.21 16.04 18.59 ?Total ROC Value(£/MWh) 45.94 53.43 45.05 42.54 49.28 52.89 ?

Total income = power value +ROC + other benefits

= >£100/MWh

= >15cents/kWh

Evolution of RO

Current technology neutral regime very successful at stimulating low cost technologies (on-shore wind, landfill gas, …..)

ROC Banding to bring forward broader range of technologies

Multiple ROC’s from April 2009

Band Technologies

ROC’s

Technology ROC’s/MWh

Landfill gas 0.25

Sewage gas, Biomass cofiring

0.50

Onshore wind, hydro, Cofiring energy crops, EfW with CHP

1.0

Off shore wind, biomass 1.5

Wave, tidal, Advanced biomass conversion (anaerobic digestion, pyrolysis, gasification),energy crops, biomass chp, PV, geothermal, microgeneration

2.0

Income up to £150/MWh

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On–shore wind

2348 MW installed 300 MW in 2007,

350MW so far in 2008 Extensive Pipeline of

projects– 1060 MW under

construction– 3159 MW consented– 6890 MW in

planning system Delays in planning

system and grid capacity being addressed

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Offshore Wind - UK

UK Potential >UK electricity demand!

Projects “awarded” by Crown Estates in bidding rounds

First Two Rounds

1118 sites, 2600 MW 15 sites, 7169 MW

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Off Shore Wind - Capacity

Project Pipeline– 7 projects, 404 MW in

operation– 936 MW under

construction (8 projects)– 3113 MW consented

UK world capacity leader

Kentish Flats Project

30 3MW Turbines, commissioned 2005

Offshore – Round 3

25GW 11 zones in areas

where SEA completed

Allocation in 2009 Operational by 2015 Crown Estates

prepared to cofund development (up to 50% of development costs) 13

£50Bn Investment Opportunity

Zone Development Process

Single Partner company with exclusive development rights for each Zone (individual or consortia)

The Crown Estate to provide a facilitating role

Partner companies to provide full development capability and resources

Relationship between The Crown Estate and development partners will be through contract

R3 - Key Milestones

June 2008: Market announcement and publication of PIN in EU Official Journal

July 2008: Industry workshops Beginning of August 2008: Invitation to submit

Expressions of Interest (OJEU contract notice) End of August 2008: Closing date for Expressions of

Interest – (96 EOI’s) Late September 2008: Release of Invitation to

Negotiate (ITN) and key contracts Q1 2009: Responses to ITN Q2 2009: Shortlist of Partners and SEA completion Q4 2009: Completion of awards to zone partners

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European Spring Council (2007) agreed to:

• Independent binding target to reduce EU’s greenhouse gas emission by 20% below 1990 levels by 2020….

• ….and to increase this commitment to a 30% reduction as part of an international agreement

• Increase the use of renewable energy to 20% of EU energy (electricity, heat and transport) consumption by 2020

• Ensure that a minimum of 10% of EU petrol and diesel consumption comes from bio fuels by 2020

• Promote energy efficiency by reducing overall EU energy consumption by 20% by 2020

EU Targets

UK Renewable Energy Strategy

UK Share of EU Target -15% of energy by 2020

Current renewables level – 1.5% of energy

Challenging! Consultation to discuss how to meet the

target and what policies would be needed – June 2008

Full strategy Spring 2009.17

The Challenge!

RE % UK Energy 2006

18

1.4% of UK Energy

The Challenge!

RE % UK ENERGY 2020

19

RE % UK Energy 2006

15% of UK Energy

Possible Technology Mix

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Policy Measures Under Consideration

Energy efficiency Review RO by increasing level and

extending end date Regional deployment targets Grid access improvement Incentive mechanism for heat and

distributed generation technologies Innovation and supply chain

development21

Feed-In Tariff Development

Powers taken in Energy Bill Projects up to 3MW can opt for FIT

rather than RO Emphasis on group/community

schemes? Technology specific support levels to be

agreed “Not worse than RO” Proposals during 2009, finalised during

201022

Short Term Priorities?

Deployment Off shore wind√ Biomass √ Wastes √ Building √

Integrated RE and Heat (once FIT details developed)

R&D,D Wave and Tidal √ PV√ Fuel Cells/H2√ Biofuels√

For further Information please contact

Adam Brown @ pera .com

+44 7723 315441