March 2011
Green Energy Futures
Jeff Kenna
A changing world ....
The Greatest Market Failure?
Beware of group thinking
Don’t
Short Term
Group Think
Wrong Measures
Do Long Term
Independent
Sustainable
Seizing opportunities
A Tale of Two Strategies
Hummer – 346 gms C02/km General Motors in Liquidation
Leaf – 0 gms C02/km Nissan in profit
What needs to happen: 2 tonnes per person by 2050
2050 Target
How can we get there? Fuel mix in a transition to low carbon society
UK: The Energy Challenge Ahead
Decommissioning of nuclear power stations
Closure of coal power stations – Large Combustion Plan Directive
Rising oil and gas prices
Political instability in oil & gas rich countries
Lack of investment in energy infrastructure
Climate change and sustainability
Rising energy demand
Consequences
Need to decarbonise our energy system
Increasing electricity prices – Minimum 25% real increase by 2020
Massive investment - £200bn by 2020
Large scale energy efficiency improvements
12% of energy to be local by 2050
Large scale expansion in renewable energy
UK in Europe
European renewable energy targets – actual versus target
Policy and Legislation
Kyoto Protocol
European Union 20/20/20 Legislation
UK Climate Change Act
•80% cut in CO2 by 2050
•Feed in tariffs
•Renewables Heat Incentive
•Carbon Neutral Homes from 2016
•15% energy from renewables by 2020 (30% electricity; 12% hear; 10% transport)
Green Deal; Green Investment Bank
The Government has used powers in the Energy Act 2008 to introduce feed-in tariffs to incentivise low-carbon electricity generation (up to 5 MW)
Scheme went live on 1st April 2010
• Payments to generators will comprise two parts:• Generation tariff
− Payment made for every kWh generated & metered
• Export tariff
− Payment made for every kWh exported to the grid
• Payments will be made by electricity suppliers to generators.• Large suppliers are designated mandatory suppliers, and have to participate by law.
• Small suppliers may participate if they wish
• Maximum capacity for the scheme is 5 megawatts (5 MW)
• Eligible low-carbon electricity technologies are – solar PV, new Anaerobic Digestion, hydro, wind, micro Combined Heat & Power
• The scheme will result in higher costs, that will be passed through to electricity users in form of higher bills...
Feed in Tariff scheme overview
A new paradigm: timing is important
Solar Photovoltaics
Solar Energy – Some Facts
Solar energy falling on a household roof is 4x the energy it uses
PV costs have come down 35% in the past 4 years
Germany has 7.5 GW of pv – supplying 1.2% of national electricity
From 2016 new houses in UK will be zero carbon
Feed in tariff makes solar pv financially viable in the UK
Area needed to meet UK annual electricity from PV
Some German PV Facts
Industry turnover €10bn
No of businesses: 10,000
No of jobs: 53,000
Export Earnings: €6bn/yr
Installed Cost €4000/kW
Market growth 2001-2008: 80% per year
10 MW solar farm in Bavaria
Solar radiation in Germany and UK
The UK Opportunity
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Assume follow German growth rate at half capacity
Would meet 3.2% UK electricity by 2020
Market of £10bn/year
250,000 new houses per year = 1000 MW of pv/year
Market Factors
PV Performance
Costs and Finance
Planning
Grid Connection
Commercial
PV Performance
Output depends on:
Solar radiation
Temperature
1 kW array will give approx 850 kWh/year in UK
10% annual variations
Costs and Finance
Size Tariff p/kWh
<4 kW retrofit 41.3
< 4 kW new 36.1
4-10 kW 36.1
10-100 kW 31.4
100 kW to 5 MW 29.3
10 kW Small Business System
Cost: £32,000
FIT: £3,100
On site: £800
Export £5
Total £3,905 (12%)
100 kW Large Business System
Cost: £300,000
FIT: £27,000
On site: £4,500
Export £2,000
O&M £3,000
Total £30,500 (10%)
• 25 year contract• RPI linked• Tax advantages• Can be leased • Can be debt financed• Good pension investment
Planning
Household systems are permitted developments unless conservation zone or AONB or listed buildings
But still a grey area for planners
Commercial systems will need planning permission
Will need some pioneers to test the water
Grid Connection
Less than 3.6 kW no permission
Smaller than 100 kW should be no problem
MW size can connect to 11 kV network
Will need grid connection study
Commercial Issues
Different business models
Performance Guarantees
Raising Debt
Offsetting risk
Ownership and roof renting
Track record and skills of contractors
O&M
One vote per investor
Minimum £500; Maximum £20,000
Tax relief on investment (20%)
Elected Board of Directors
Invests in each spvOther investors
Community Energy Companies
Producing your own energy: The Benefits
An investment opportunity
8-10% inflation proof
Long term & better than banks
Positions your company
Value add to local community
Supports global and national targets
Secures low cost electricity; hedge against price rises
Ban Ki-Moon Speech to World Business Leaders
We meet at a critical moment in human history….
Climate change is the defining challenge of our time. I also believe it is the most potent game-changer for business over the next century. It is an opportunity we must seize.
I want to challenge you. I want to see you in the vanguard of an unprecedented effort to retool the global economy into one that is cleaner, greener and more sustainable.
This will not be easy. Fundamental change never is. But, if we get it right, we can reasonably look forward to sustained growth and prosperity.
If we get it wrong we face catastrophic damage
to people, to the planet
– and to the global marketplace.
Camco is an international leader in identifying opportunities and providing solutions to carbon risk.
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