Getting the best out of FITsSave Money? and the Planet

Is it as simple as that?

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BUILDING COMMUNITIES BRIDGING CONTINENTS To a Sustainable Future

Keith Tovey ( 杜伟贤 )

Rotary Club of Norwich17th February 2011

Presentation will be placed on WEB tomorrow at:http:/www2.env.uea.ac.uk/energy/nbs-m018/nbs-m018.htm

Potentials for Saving Money and the Planet• In next 10 years there is a need to address the issues of Energy Security

and Carbon Reduction of Energy Supply.

• In Energy Efficiency

• In Energy Management

• In Electricity Production

• Move from high carbon fuels: coal, oil, gas

to

• Nuclear

• Renewables

• Carbon Capture and Sequestration

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Reduction in Energy Use

Will not be available on scale required until 2025 at the earliest.

An important component to consider now because of inaction on renewables and conservation in past - but not until 2019 at earliest

Available now but financial support needed for small scale and emerging technologies.

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Wholesale Price of Electricity – weekly averages

Prices have become much more volatile since UK is no longer self sufficient in gas.

Announced 16th February 2011 – Liquid Natural Gas Transportation rates are expected to double or triple in 2011

UK becomes net importer of gas

Completion of Langeled Gas Line to Norway

Oil reaches $140 a barrel

• Electricity retail prices have risen by ~6.0% over last 10 years, much less than wholesale electricity prices but 2.2 times RPI

• In 1990s electricity retail prices rose by 1.3% less than 40% of RPI.

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Variation in Wholesale and Retail Electriity Prices

Low Carbon Non-Electricity Options• Heating

- [Renewable Heat Incentive (RHI) – from June 2011]– Heat Pumps– Biofuel options for boilers– Biomass– Solar Thermal

Opportunities for both Domestic and Businesses• Transport - [Renewable Transport Fuel Obligation (RTFO)]

– Biofuels: Biodiesel and Bioethanol– Electric Vehicles– Fuel Cells

Obligation on all suppliers to include a given percentage of biofuels in petrol and diesel.

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Incentives for Non-Electricity Options

• Non Fossil Fuel Obligation (NFF0) - 5 separate tranches in 1990s. Was a Feed in Tariff, but failed to deliver largely because of planning issues. Only suitable for large generators.

• Renewable Obligation (RO) - from 1st April 2002. Sets targets which all suppliers had to meet – otherwise they were fined for non-compliance (Buy Out). The fines were recycled to those bodies who held certificates (ROCs) of Renewable Generation. Currently worth around £0.3 billion.

These “Buy-out Fines” are inflating unit price of electricity by around 0.1p or 0.5-1.0%.

Used by both large scale and small scale generators

• From 1st April 2010 all small generators < 50kW were transferred to the Feed In Tariff (FIT) Scheme as were all new small schemes. Medium sized schemes can opt to be in FIT or RO scheme. Large schemes can only be in RO.

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Renewable Energy Incentives in UK - Electricity

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Renewable Obligation Certificates

The Regulator

OFGEM

SUPPLIERS

Trader and Brokers

Renewable Generator

Notifies Regulator how much generated.

Sells ROCs to Trader

Sells Electricity with or without ROCs

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

Supplier Buys ROCs from Trader

ROC’s issued

FINES recycled to holders of ROCs in proportion to number of ROCs held.

Because of recycling, ROCs have value greater than their nominal face value

Notifies Regulator how much generated.

Wholesale Price

Jan 2011 4.950p

cf Jan 2010 4.521p

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Incentives under the Renewable ObligationSeveral benefits to generator (e.g. wind)

• Whole sale price of Electricity

• Value of the Renewable obligation Certificate

• Mark up price arising from Buy- Out Fines

• Other small benefits

• BUT if target is met – ROC certificates become worthless

• Overall value might be up to 10p but could be much less

• At highest level of incentive – i.e. actual current value of ROC ~ 5.0p cost for reducing 1 tonne of CO2 ~ £95 per tonne

ROC Certificate 3.996p

Recycled Fines 1.0 – 1.5p

• The Renewable Obligation encounters risk and much paperwork for small potential generator

• Led to Introduction of Feed in Tariff from 1st April 2010.

• A fixed amount is paid per unit and guaranteed for up to 25 years.

• BUT General Capital Grants no longer available• Payment is for electricity generated whether it is actually exported

to grid on consumed on premises.

A frequently asked Question

• Will I have electricity when there is a power cut – assuming of course the sun is shining (if I have solar) or the wind is blowing (if I have a wind turbine)?

• NO!! – unless you have facilities for both “Island Mode Operation” and Grid Connection which can be very expensive for the small generator.

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Feed in Tariff

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The Technologies - Solar

Solar PhotoVoltaic (Electricity)

2.16 kWp ~ 16 sqm (Suffolk)Estimated output ~ 1650 kWh/annum

3.70 kWp - ~ 25 sqm (Wales)Estimated output ~ 3000 kWh/annum

Most electricity generators provide DC power and inverters are needed to convert to AC with connection to the GRID – such inverters consume some electricity ~ seasonal efficiency ~ 92%.

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The Technologies – Micro Wind

Building Mounted - ~ 1kW machines ~ generally poor performance because of turbulence

Mast mounted away from buildings - 6kW Potential output 6000 – 12000 kWh depending on location

Vertical Axis machine – better in turbulence

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Micro CHP

Other Technologies generating Electricity

Replaces normal boiler

Provides heat and electricity – would normally run on gas

Micro-Hydro (Itteringham Mill)

5.5kW annual output depends on flow 12000 – 18000kWh

• Payments range from 4.5p per kWh to 41.3p per kWh depending on technology and capacity of generator.

– e.g. for small scale retro-fitted solar, the payment would be 41.3p for kWh generator and guaranteed for 25 years, but new entrants from 1st April 2012 will get 37.8p

• An additional 3p per kWh is paid for any electricity surplus to demand which is exported.

• This amounts to a renewable incentive of ~39p per kWh and £742 per tonne of CO2

( assuming a wholesale price of ~ 5p)

• Nearly 8 times the subsidy for wind generation under the ROC scheme

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Feed in Tariff

~44.3p per kWh for PV

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Energy Source Scale Generation Tariff (p/kWh) Duration

< 31/03/2012 > 01/04/12 (years)

Anaerobic digestion ≤500kW 11.5 11.5 20Anaerobic digestion >500kW 9 9 20Hydro ≤15 kW 19.9 19.9 20Hydro >15 - 100kW 17.8 17.8 20Hydro >100kW - 2MW 11 11 20Hydro >2kW - 5MW 4.5 4.5 20Micro-CHP***** <2 kW 10 10 10Solar PV ≤4 kW new 36.1 33.0 25Solar PV ≤4 kW retrofit 41.3 37.8 25Solar PV >4-10kW 36.1 33.0 25Solar PV >10 - 100kW 31.4 28.7 25Solar PV >100kW - 5MW 29.3 26.8 25Solar PV Standalone 29.3 26.8 25Wind ≤1.5kW 34.5 32.6 20Wind >1.5 - 15kW 26.7 25.5 20Wind >15 - 100kW 24.1 23.0 20Wind >100 - 500kW 18.8 18.8 20Wind >500kW - 1.5MW 9.4 9.4 20Wind >1.5MW - 5MW 4.5 4.5 20Existing generators transferred from RO 9 9 to 2027

Feed in Tariffs – Introduced 1st April 2010

***** for first 20000 installations

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Feed in Tariffs – Example for PV

Payment for tariffs will be from a levy on Utility Companies which MAY see a cumulative rise in bills of around £1 billion or more.

In addition there will be a payment of 3p per kWh for any electricity exported as opposed to consumed on premises.

BUT an export meter is needed to identify this.

Householder will save on imported electricity at ~ 11 – 12p per kWh, so optimum financial model may not be to generate as much as possible i.e. for each unit generated and consumed it is worth 41.3+ 12 = 52.3p /kWh for each unit exported it is worth 41.3 + 3 = 44.3 p/kWh

If no export meter is fitted : Transition arrangement of assuming (deeming) that 50% of generation will be exported will be made - that may well not be as attractive to consumer.

Link to Example

0 30 60 90 120 150 180 210 240 270 300 330 360 N NE E SE S SW W NW N

Azimuth <20  

20-30  

30-40  

40-50  

50-60  

60-70  

70-80  

80-90  

90-100  

100  

Solar Rosette Diagram for East Anglia

Colour key: Figures show percentage output in particular orientation relative to maximum

Optimum orientation is 35 degrees tilt and Azimuth 190 i.e. 10 degrees west of South

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Renewable Heat Incentive: The Technologies

• Biomass boiler - most convenient if running on pellets

• Cheaper with wood chip but difficult to automate

• Pellets ~ probably comparable in price with gas, but Renewable Heat Incentive would pay for heat generated

Solar Thermal – example 2.6 sqm in Norwich – generates 826kWh/year (average over 7 years).

The more hot water you use the more solar heat you get!

Note: Unlike FITs, the present proposals are for amount generated to be estimated and may be very different from actual – could be open to abuse and legal challenges.

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Renewable Heat Incentive: The TechnologiesGround Source: Heat Pumps

Typically twice floor area of house is required for heat collection.Best performance with under floor heating – i.e difference between heat supply and source temperature is as low as possible

Zones of house can be controlled via a manifold

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Renewable Heat Incentive: The Technologies

Heat pumps run off electricity

For a well designed ground source heat pump system: Typically 3.5 – 4.5 as much heat is produced as electricity consumed – the Coefficient of Performance (COP).

If a buffer tank is included in system, then off peak electricity can be used to heat store overnight – minimising use of full rate electricity.

Air source heat pumps require external fan system, and are not as efficient as air temperature is low when most heat is needed.

Retro fitting with existing radiators will lead to poor COP, but could be improved by fitting double radiators and/or a buffer tank

Renewable Heat Incentive

Scale ProposedTariff (p/kWh)

Deemed/ormetered

lifetime(years)

Solid biomass Up to 45 kW 9 Deemed 15Bioliquids Up to 45 kW 6.5 Deemed 15Biogas on-site combustion

Up to 45 kW 5.5 Deemed 10

Ground source heat pumps

Up to 45 kW 7 Deemed 23

Air source heat pumps

Up to 45kW 7.5 Deemed 18

Solar thermal Up to 20kW 18 Deemed 20

Small Scale Installations – Table of Tariffs

Tariffs for Large Installations are less.Awaiting response from Government following Consultation – information above may well change .

Original target date for implementation – 1st April 2011

Now targeted for June 2011

The Future of Incentives: From the National Infra-Structure Plan 2010 following Comprehensive Spending Review

• The Government will reform the electricity market, so that it attracts the private sector investment necessary to meet the UK’s energy security and climate change objectives, including the investment in nuclear, carbon capture and storage and renewable technology.

• In addition to supporting the carbon price, this will also assess the role that revenue support mechanisms (such as Feed-In Tariffs), capacity mechanisms and emission performance standards could play.

• For complete information see Section 4 ofhttp://www.hm-treasury.gov.uk/d/nationalinfrastructureplan251010.pdf

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From the National Infra-Structure Plan 2010 following Comprehensive Spending Review

The Government will

• maintain the Feed-In-Tariffs to support investment in emerging small-scale generation technologies in electricity, saving £40M by improving their efficiency,

and complement this with

• the Renewable Heat Incentive to reward ground-source heat pumps and other renewable heat sources,

while making efficiency savings of 20% by 2014-15 compared with the previous government’s plans.

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For complete information see Section 4 ofhttp://www.hm-treasury.gov.uk/d/nationalinfrastructureplan251010.pdf

From the National Infra-Structure Plan 2010 following Comprehensive Spending Review

The Government will (para 4.18):• Support investment in low carbon energy supply by:

maintaining Feed-In Tariffs for small-scale generation, funded through an obligation on electricity suppliers equating to a levy of almost £900 million over the period to 2014-15. At the same time, the efficiency of Feed-In Tariffs will be improved at the next formal review [2012], rebalancing them in favour of more cost effective carbon abatement technologies.

May be an issue for PV as carbon abatement using PV is

>£700 per tonne saved way above many other strategies cf

~£95 for wind, ~£20 for cavity insulation

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For complete information see Section 4 ofhttp://www.hm-treasury.gov.uk/d/nationalinfrastructureplan251010.pdf

Equivalent to £36 per household

• For Renewable Obligation: there is a small levy ~ 1% on all bills meaning that those who use most pay most –

• For Feed in Tariff: there is also a levy on all electricity consumed.

– Those with capital to pay for installation will be paid and will save on electricity consumed and will benefit more than any rise in tariffs.

– Those who do not install will see their bills rise and will be subsidising those who have installations.

• Is it fair to all concerned:

• Does it pass the Rotary Four Way Test?

• Current Proposals for Renewable Heat Incentive will pay an estimated amount.

– What is to stop a person not using a Solar Water Heater and still receive the incentive???

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Who really pays for Electricity Incentives?

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Conclusions (1)

• Current Renewable Electricity in UK is saving around 12 Mtonnes of CO2 a year.

• The Renewable Obligation is increasing electricity bills by around 1%, levied on all consumers.

• The Feed in Tariff will see a further increase in bills, and will provide an income for those installing PV, etc as well as reduced electricity consumption.

• BUT those not installing will see their bills go up disproportionately.

• There is a greater return on capital if size of scheme is matched with demand

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Conclusions (2)• The Feed in Tariff for PV is a costly way to reduce carbon

~£750 per tonne compared to

~ £95 for large scale wind, and

~£20-£30 for cavity insulation.

• The Renewable Heat Incentive has yet to be finalised

• Following the Comprehensive Spending Review a review of incentives in 2012 may well significantly reduce benefits for PV, but increase those for other strategies – e.g. insulation, micro-CHP???

• Previous experience suggests that existing Rights to tariffs will be “Grandfathered”

• Finally: If you want to take advantage – do so before 1st April 2012.

http://www2.env.uea.ac.uk/energy/nbs-m018/nbs-m018.htm