The UK Experience Clean Energy, Good Governance and Regulation Andrew Walker – March 2008

What is Clean Energy? Renewables - bio-fuels, cost effectiveness, implementation or development? Nuclear - what about the waste? Carbon capture and storage - will it work on a large scale?

Renewables

- bio-fuels, cost effectiveness, implementation or development?

Nuclear

- what about the waste?

Carbon capture and storage

- will it work on a large scale?

UK Experience – Clean Energy Renewables – in 2006 about 5½GW of capacity generating about 5½ per cent of electricity Nuclear – in 2006 about 11GW of capacity generating about 19 per cent of electricity

Renewables – in 2006 about 5½GW of capacity generating about 5½ per cent of electricity

Nuclear – in 2006 about 11GW of capacity generating about 19 per cent of electricity

UK Experience - Strengths Early commitment to renewable energy with the introduction of the NFFO in 1990 Political consensus – support for renewable energy, Stern Review and White Paper on Nuclear Power Resource base for renewable energy – Severn Barrage 8½GW and offshore wind +200GW

Early commitment to renewable energy with the introduction of the NFFO in 1990

Political consensus – support for renewable energy, Stern Review and White Paper on Nuclear Power

Resource base for renewable energy – Severn Barrage 8½GW and offshore wind +200GW

UK Experience - Weaknesses Lack of coordination between government energy policy, the planning regime and energy regulation Design of the arrangements to support renewable energy The focus of energy regulation is competition / regulation of natural monopoly – not the environment

Lack of coordination between government energy policy, the planning regime and energy regulation

Design of the arrangements to support renewable energy

The focus of energy regulation is competition / regulation of natural monopoly – not the environment

Coordination Issues The planning process led to the approval of a relatively large number of small scale onshore wind farms This led to growing public dissatisfaction with visual intrusion A relatively small number of large onshore wind farms would have been more effective

The planning process led to the approval of a relatively large number of small scale onshore wind farms

This led to growing public dissatisfaction with visual intrusion

A relatively small number of large onshore wind farms would have been more effective

Support Mechanisms NFFO – regulator picked schemes on the basis of cost effectiveness, but few actually got built RO – obligation on suppliers and if they do not deliver they must make buyout payments, complex and volatile, has not promoted the development of Severn Barrage or offshore wind

NFFO – regulator picked schemes on the basis of cost effectiveness, but few actually got built

RO – obligation on suppliers and if they do not deliver they must make buyout payments, complex and volatile, has not promoted the development of Severn Barrage or offshore wind

Energy Regulation (1) Bi-lateral trading arrangements and imbalance settlement unhelpful for renewable energy No strategic consensus with Government Long on rhetoric and short on action

Bi-lateral trading arrangements and imbalance settlement unhelpful for renewable energy

No strategic consensus with Government

Long on rhetoric and short on action

Energy Regulation (2) Abolished deep connection charges for distributed generation but introduced use of system charges Key initiatives on offshore wind, transmission capacity, distributed generation and micro-generation led by Government and not the regulator

Abolished deep connection charges for distributed generation but introduced use of system charges

Key initiatives on offshore wind, transmission capacity, distributed generation and micro-generation led by Government and not the regulator

Conclusions The challenge of climate change is so great that it is likely renewable, nuclear and CCS will all need to be developed Coordination between Government agencies within and between countries essential Regulation needs to fully take account of the changing strategic landscape

The challenge of climate change is so great that it is likely renewable, nuclear and CCS will all need to be developed

Coordination between Government agencies within and between countries essential

Regulation needs to fully take account of the changing strategic landscape