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UK Microgeneration: A Matter of Priorities March 30, 2011

Posted by Laura Arnold in Feed-in Tariffs (FiT).
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http://www.renewableenergyworld.com/rea/news/article/2011/03/uk-microgeneration-a-matter-of-priorities

By Miguel Mendonça, Consultant
March 30, 2011   

London, UK — The traditional stop-start development of the UK renewables industry continues. Just shy of one year after the feed-in tariff for small-scale electricity generation was introduced, it has had its first major cut proposed. Although the anger from industry and other advocates is understandable, the moves from government are understandable too.

Having spent two months interviewing a wide variety of actors involved with the FIT for a new study, it all starts to make sense.

What I mean is, it makes sense according to the picture one gets from conversations with government, as well as through historical perspective. First, no UK government has yet been ready to commit in concrete terms to a major renewables strategy. Second, the current government is taking a pragmatic approach to energy and industrial policy, as well as feeling pressure from the Treasury. When caught between these two facts, you will get what we now have: a limited policy, of limited use to some parties wishing to engage with it.

The government’s energy pathway seems based in large part on asking “what’s in it for us?” Speaking with senior figures in the Department of Energy and Climate Change (DECC), and the Department for Business, Innovation and Skills (BIS), there is a clear sense of pragmatism at work.

A study was conducted to assess the UK’s competitive advantage, and based on this study, several technologies were identified which, with some government support, could be taken from R&D to export market stage, creating industrial, economic and commercial benefits.

When considering a deep investment in solar PV, which is mostly imported, the reverse is almost true. Even thought we have seen a tripling of registered installation companies in one year, from around 600 to around 1,800, with two thirds being in PV, the manufacturing jobs will still be created in other countries unless and until the UK creates a significant domestic market.

The potential for this is seen by some as being hamstrung by the recently announced government proposals, which seek to slash the tariff rates for PV schemes above 50kW. Although this will go to consultation, the UK government almost always means “decision” rather than “proposal” when it runs these mandatory public consultations.

Investors are already reportedly walking away from projects in the UK, a phenomenon that started to occur even before this latest announcement was made, simply due to the level of uncertainty created by the early review of the FIT.

Many analysts and insiders have identified the Treasury as being the major blocker at this time. The department is implicated in pressuring a number of green schemes, including the FIT, the Green Investment Bank (GIB) and the Green Deal. In my interviews for the UK FIT study, it was communicated repeatedly that the interaction of these and other policies is seen as crucial to building a competitive and effective low carbon economy, and in drawing in the investment that is central to achieving this.

The major issue is probably the UK’s balance sheet. Apparently the Treasury views the GIB, for example, as a liability, and hence an impediment to reaching the government’s public debt targets. In an era of wide and deep cuts to public sector spending, anything seen to be adding to the nation’s debt will be treated as an enemy. Given the huge potential for green economy job growth in the UK, suggested by a senior civil servant from BIS as being 500,000 by 2020 in renewables alone, this matter of the balance sheet clearly needs to be ironed out fast.

What was most apparent from the FIT study was its ability to act as a glue between a wide variety of actors and aims. Whether public or private, whether for the greater good or personal gain or both, the FIT allows many different parts of society to participate, even if it just the basic contribution made through electricity bills each month.  This is said to be about 1p per month at this stage, which makes 27,000 installations and 100 MW of decentralised capacity a healthy return (and one which is in fact below government expectations).

Study Shows Societal Influence is Key to Effective FIT

The principal aim of the study was to discover more about the qualitative effects of the policy, rather than stick to the reductionist, quantitative approach that dominates reporting and discussion. It is clear that we are dealing with a sociological phenomenon as much as a technical or economic one. The experience of the people involved, many of them being “non-traditional generators,” is important to understand, as they must be accommodated in order for the policy to be effective.

The participation of all of society is the key to sustainability. People must have a reason and an opportunity to involve themselves. One interviewee had undertaken a study of public attitudes to climate and energy issues on an impoverished council housing estate, and found a high percentage of people felt it was someone else’s job to deliver carbon savings. This may well be indicative of a large slice of the population, which is why policy must exist which takes account of such beliefs, and gives people a way in.

Although it will take time, social shifts such as those that sustainability requires come about for a number of complex reasons. What is clear is that change comes more easily when large parts of society are persuaded of the benefit to them.

Change is often started by a small sector of society, as in the computer and mobile phone revolutions that have swept most of the world in the last few decades. However, these took place in the face of no major opposition from vested interests. There were no fake grassroots groups set up by the paper industry to fight the coming of email.

If renewable energy is to make real headway, perhaps that must be measured by the ambitions of national governments. The rhetoric, the cheerleading, is fine as far as positive communication goes, but people need more. They need more job opportunities, they need more and better communication that spells out the benefits of transitioning to renewables, they need to see other people doing it, they need an easy way of doing so themselves.

This is fraught with challenges, not least of which are the efforts of private interests to secure as much financial benefit for themselves as possible. The UK government’s moves to lock off the FIT for smaller projects send two immediate signals. One is that the programme, and hence the government’s goal for microgeneration, is limited.  The other is that if this is indeed the major overreaction that certain interests see it as, then there are views on solar within government that it is not being transparent about.

Ultimately the government is doing the business of politics, endeavouring to balance competing needs and wants from a variety of actors. It sees large-scale energy production installations as being the solution to large-scale energy production requirements. It sees microgeneration as being for “hobbyists not lobbyists,” and it sees the balance of trade and the national balance sheet as being priorities.

If the Treasury holds the institutional advantage within government, then all of the above makes sense, even if over the longer term the ability to construct an efficient, resilient, low carbon economy would ensure the nation has a more secure future. Both human nature and its expression in politics are mainly about short-term needs, and the contest between competing needs (needs being generally subjective).

What emerges from this analysis is once again the conclusion that the industry needs to work collaboratively and creatively to generate more public and political support for a prioritisation of renewables in the national energy mix. The geographically and technologically decentralised nature of the renewables industry makes this harder to achieve than for the fossil and nuclear industries, which themselves mirror more closely the centralised structures and interests of government.

Mine is just one view, and by no means a complete picture, but it is constructed and offered to add to the evolving discussion, to the work done by others towards an understanding of actors and barriers, as well as opportunities and strategies available to those wishing to accelerate the national deployment of renewables. 

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Comments»

1. Gary Reese - March 30, 2011

Seems to me the author has a very good grasp of the situation. Much of this holds true for the USA as well.


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