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ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science Director CRed Project

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Page 1: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

ENV-2E02 Energy Resources

2004 - 2005

5. Non-Fossil Fuel Obligation: Renewable Obligation

Keith ToveyН.К.Тови М.А., д-р технических наук

Energy Science Director

CRed Project

Page 2: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

• NFFO-1 Introduced at time of privatisation, levy on all energy generated from fossil fuels.

• used to subsidise the non-fossil fuels.

• REC's expected to purchase a minimum percentage of their electricity from such sources.

• original proposal seen as solely a subsidy for the nuclear industry as there was little renewable energy

• …………………………….(but needs qualification)

• changed to a separate section for Renewables and Nuclear,

• Renewables section was subdivided further by technology type.

5.1 Non-Fossil Fuel Obligation: Introduction NFFO-1

Page 3: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

• The NFFO-1 (1990) required a minimum contribution of 102 MW from new "renewables".

Fixed price per MWh was paid for renewable energy. Price paid per unit varied significantly with technology Wind energy had the highest price at 11p per kWh compared to a typical consumer price of 6 – 7 p and a generating

cost from fossil fuels of around 3 – 4p per kWh. a substantial subsidy for wind.

Potential generators had to submit applications for the subsidy, many did not receive planning permission, or failed through lack of finance.

Subsidy was paid until 31/12/1998 –limit placed by the EU

5.1 Non-Fossil Fuel Obligation: Introduction: NFFO-1

Page 4: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

As with NFFO-1 a fixed price was paid to all generating capacity

NFFO-2 (1991) was further divided by technology type

5.2 Non-Fossil Fuel Obligation: NFFO-2

TechnologyGroup

NFFO-2Requirement

ActualContracts

AvailableNovember 2000

price perkWh

(MW)` (MW) (MW)WASTEMunicipal/industrial

261.48 271.48 31.5 6.55

Other Waste 28.15 30.15 12.5 5.9Landfill 48.0 48.45 46.4 5.7Sewage 26.86 26.86 19.1 5.9Hydro 10.36 10.86 10.4 6.00Wind 82.43 84.43 53.8 11.00Total 457.28 472.23 173.7

The payments under NFFO-2 expired on 31/12/1998

Page 5: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

5.3 Non-Fossil Fuel Obligation: NFFO-3

TECHNOLOGY RequirementDNC (MW)

Available(Nov: 2000)

(MW)

Energy Crops Gasification 19.056Energy Crops Residues 103.805

46.5

Hydro 14.480 11.7Landfill 82.071 82.1Municipal and IndustrialWaste

241.765 77.4

Wind - large 146.916Wind - small 19.707

44.7

Total all schemes 627.800 262.5

Note: substantial shortfall again

Page 6: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

• Many schemes failed through planning permission etc.

• DTI "size capped" schemes

• Ensured a sensible spread between Technologies.

• Clearance given from EU for NFFO-3 to extend beyond 1998,

(to 30th November 2014,

• NOTE: this excludes NFF0-1 and NFFO-2 projects.

• Unlike NFFO -1 and NFFO-2, price paid for renewables was NOT a fixed price.

• Different bids for each supplier within each technology band

• Lowest bids got subsidy

• Declared intention of 627.800 MW

• but only 292.584MW by end of 2002.

5.3 Non-Fossil Fuel Obligation: NFFO-3: January 1995

Page 7: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

• NFFO orders 4 and 5 came into force in 1996 and 1998

• given subsidy for 20 years to finish in 2016 ande 2018 respectively

• bids significantly lower than for NFF0-3

• Overlap with Renewables Obligation - some schemes still coming on line

• Delays in inplementation even after subsidy available.

5.4 Non-Fossil Fuel Obligation: NFFO- 4 & 5

5.5 Non-Fossil Fuel Obligation: General Comments• In 1995 declaration made by Government to have 1500MW of

new renewable generation by 2000

• by December 31st 2003, figure was only 1058.37MW

• a total of 97.92MW under NFFO 1 & 2 are no longer operational

Page 8: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

Hydro 9 7.63 Landfill gas 17 29.32

Municipal and industrial waste 4 40.63

Other 2 25.38 Sewage gas 6 5.98 Wind 2 5.81 Total 40 114.74

NFFO - 1 (1990)

Number of Projects

Capacity (MW)

ORDER Technology

Hydro 2 2.78 Landfill gas 26 46.39 Municipal and industrial waste 2 31.50 Other - - Sewage gas 17 18.39 Wind 21 52.20 Total 68 151.26

NFFO - 2 (1991)

NFFO Projects in Operation on 31st December 2003

Page 9: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

NFFO Projects in Operation on 31st December 2003

Energy crops and agricultural and forestry

2 69.50

Hydro 8 11.74 Landfill gas 42 82.07 Municipal and industrial waste 7 89.12 Wind - large 10 41.02 Wind - small 13 11.86 Total 82 305.31

NFFO - 3 (1995)

Number of Projects

Capacity (MW)

ORDER Technology

BUT: 142 projects with a total of 626.90MW were contracted

Actual installation of Wind is only 28% of contracted figure in 1996.

Page 10: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

NFFO Projects in Operation on 31st December 2003Number of

ProjectsCapacity

(MW)ORDER Technology

Hydro 9 2.49

Landfill gas 57 146.00 Municipal and industrial waste - CHP

4 33.48

Wind - large 4 12.97 Wind - small 5 3.27 Anaerobic digestion of agricultural waste

1 1.43

Total 80 199.64

NFFO - 4 (1997)

Hydro 3 0.64

Landfill gas 67 137.26 Wind - small 6 4.85 Total 76 142.75

NFFO Total

England and Wales 346 913.70

NFFO - 5 (1998)

Page 11: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

NFFO Projects in Operation on 31st December 2003Number of

ProjectsCapacity

(MW)ORDER Technology

Biomass 1 9.80 Hydro 9 8.81 Waste to Energy 2 3.78 Wind 7 25.13 Total 19 47.52 BiomassHydro 2 1.46 Waste to Energy 6 17.65 Wind 5 31.29 Total 13 50.40 Waste to Energy 7 16.04 Wave 1 0.20 Wind - large 1 8.29 Wind - small 5 4.28 Total 14 28.81

SRO Total 46 126.73

SRO - 2 (1997)

SRO - 1 (1994)

SRO - 3 (1999)

Page 12: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

NFFO Projects in Operation on 31st December 2003Number of

ProjectsCapacity

(MW)ORDER Technology

Hydro 8 2.33 Sewage gasWind 6 12.66 Total 14 14.99 BiogasBiomass 2 0.30 Hydro 1 0.08 Landfill gasMunicipal and industrial wasteWind 2 2.57 Total 5 2.95

NI NFFO Total

19 17.94

NI NFFO - 1

(1994)

NI NFFO - 2

(1996)

Page 13: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

NFFO Projects in Operation on 31st December 2003

ORDER Number of Projects DNC (MW)

NFFO - 1 40 114.74

NFFO - 2 68 151.26

NFFO - 3 82 305.31

NFFO - 4 80 199.64

NFFO - 5 75 142.75

TOTAL NFFO 346 913.7

SRO - 1 19 47.52

SRO - 2 13 50.4

SRO -3 14 28.81

TOTAL SRO 46 126.73

NI NFFO -1 14 14.99

NI NFFO -2 5 2.95

TOTAL NI NFFO 19 17.94

TOTAL ALL ORDERS 411 1058.37

Page 14: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

Electricity Generation by Renewables 1990 - 2003

-

2,000

4,000

6,000

8,000

10,000

12,000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

GW

h

solarwind/waveother biofuelsWasteSewagelandfillhydro

Solar 3 GWh

Page 15: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

Electricity Generation by Renewables 1990 - 2003

0

50

100

150

200

250

300

350

400

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Ele

tcir

icty

Gen

erat

ed (

TW

h)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

% R

enew

able

Gen

erat

ion

Electricity Generated

% Renewables

Page 16: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.7 Renewables Obligation• First Consultation - 1999• Second Consultation - 2000• Implementation on 1st April 2002

– (one year after NETA implemented)– NETA favour flexible generators and had adverse effects on

renewables until RO was implemented

• Aim to replace NFFO and provide a long term mechanism to stimulate renewables

• Initial target: 10.4% renewables by 2010 • later increased to 15.4% by 2015• aspiration of 20% by 2020.

Page 17: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.7 Renewables Obligation

• On whom should the Obligation be?• The Generators?• The National Grid Company?• The Distributors (e.g. EDF in this region)?• The Suppliers (not generators) (e.g. nPower,

PowerGen, etc).?• The Consumers?

Ultimately it was decided that Suppliers should be liable and that they would be required to demonstrate comnpliance

Page 18: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.7 Renewables Obligation

Source Needed for10%

Target

RenewablesObligation

ClimaticChange LevyExemption

CapitalGrants

Available

Landfill Gas

Sewage Gas

Energy from Waste

Large Hydro > 10 MW

Small hydro

On shore Wind

Offshore Wind

Agricultural andForestry Residue

Energy Crops

Wave Power

Photovoltaics

Page 19: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

5.9 Renewable Obligation Certificates -Operation

The Regulator

OFGEM

SUPPLIERS

Trader and Brokers

Renewable Generator

Notifies Regulator how much generated.

ROC’s issued

Sells ROCs to Trader

Sells Electricity with or without ROCs

Notifies OFGEM of compliance -i.e. ROCs or pays FINE

Buys ROCs from Trader

FINES recycled in proportion to ROCs held

Page 20: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

• £12 - 18 per MWh Recycled fines

• £1.50 per MWh Embedded benefits - less losses

• £4.30 per MWh Climatic Change Levy

• £31.39 per MWh Value of ROC

• £20 - £22 per MWh Wholesale Electricity Price

Less Neta Imbalance charges ~ £2 per MWh

Value of Renewable Generation £56- £70 per MWh i.e. 2.5 to 3 times of normal price.

5.9 Renewable Obligation Certificates -Operation

Page 21: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

5.9 Renewable Obligation Certificates -Operation

42

43

44

45

46

47

48

49

50

51

52

53

Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05

£ pe

r M

Wh

Auction Prices by Non Fossil Purchasing Agency

This are prices paid for ROC’s generated under NFFO-3, 4 ,and 5 which by themselves do not qualify for ROC’s.

Buy out Prices

April 2002

3p per kWh

April 2003

3.059p per kWh

April 2004

3.129p per kWh

Page 22: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.10 Renewables Obligation: B & B

• Banking up to 50% of certificates in any one year• Borrowing up to 5% of certificates in any one year.• Since Certificates available fall well short of

demand, these have not really been an issue.

15.11 Banding

• Some Technologies are more cost effective than others.

• Government rejected idea of different level of banding for different technologies

• Capital Grants available for 2 technologies

Page 23: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.13 Renewables Obligation: Amendments• Amendments: 1st April 2004• Two issues were addressed:• Co-firing• This involves firing power stations with both fossil fuel and

biomass (Ironbridge Power Station)

• Threshold for ROCs• Prior to Amendment, a minimum of 0.5 MWh had to be

generated in each and every month.• One ROC was allocated for each 1MWh, but an odd 0.5 - 1

MWh would qualify.

Page 24: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.13 Renewables Obligation: Amendment• Co-firing

– Until 31/03/ 2006 all biomass co-firing qualify for ROCs– From 01/04/2006 to 31/03/2011, 75% of biomass must come from crops specifically grown for

purpose– Co-firing not eligible for ROCs after 31/03/2011

• i.e. agricultural wastes do NOT come into this category

• Problem: Not sufficient development in crops• Amendment

– Until 31/03/ 2009 all biomass co-firing qualify for ROCs– From 01/04/2009 to 31/03/2010, 25% of biomass must come from crops specifically grown for

purpose– From 01/04/2010 to 31/03/2011, 50% of biomass must come from crops– From 01/04/2011 to 31/03/2016, 75% of biomass must come from crops

– Co-firing not eligible for ROCs after 31/03/2016

Page 25: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.13 Renewables Obligation: Amendment

• Co-firing Amendment

• To prevent abuse with most ROCs coming from Co-firing

– from 01/04/2006 to 31/03/2011 a maximum of 10% of ROCs can be obtained by co-firing

– from 01/04/2011 to 31/04/2016 a maximum of 5% of Rocs can be obtained by co-firing

• Many species can be harvested every 3 years

• proposals allow 3 crop cycles during eligibility for ROCs

Page 26: ENV-2E02 Energy Resources 2004 - 2005 5. Non-Fossil Fuel Obligation: Renewable Obligation Keith Tovey Н.К.Тови М.А., д-р технических наук Energy Science

15.13 Renewables Obligation: Amendment

• Threshold for ROCs– ZICER could not qualify as output in November > February could not be

guaranteed to exceed 0.5 MWh

• Amendment– Average over whole year to be in excess of 0.5 MWh per month.

– ROCs based on annual output

– based on number of MWh (odd 0.5 MWh and above qualifying)

– Available only for generators < 50 kW peak

Further amendments under discussion late 2004– Renewables Obligation Review: 2005 - 2006 terms of Reference Published

– One suggestion: offset CHP against Renewable Obligation

– Would make target more likely to be achieved,

– Would considerably water down renewables

see DTI Energy Group WEBSITE www.dti.gov.uk/energy/renewables