Renewable Energy in the UK Strategy and Opportunities Adam Brown Sector Champion – Renewable Energy UK Trade and Investment Florida 20 November 2008

UK Renewable Energy Inward Investment Propositions Long term vision Supportive policy framework Financial and Fiscal Support Companies with developed technology, expertise or operating experience Companies developing new technology. Rapidly growing market World leading research capability Supportive collaborative research environment .

Topics Some Recent Developments The RO Off-Shore Wind The UK Renewable Energy Strategy Targets and Technology Mixes Policy Measures Needed Inward Investment Opportunities

Some Recent Developments

The RO

Off-Shore Wind

The UK Renewable Energy Strategy

Targets and Technology Mixes

Policy Measures Needed

Inward Investment Opportunities

Recent Developments DECC BERR Energy Team + DEFRA CC Team Office for Renewable Energy Deployment Manufacturing Strategy Focus for “green jobs” Builds on RETPS The Climate Change Bill Target 80% CO 2 reduction by 2050

DECC

BERR Energy Team + DEFRA CC Team

Office for Renewable Energy Deployment

Manufacturing Strategy

Focus for “green jobs”

Builds on RETPS

The Climate Change Bill

Target 80% CO 2 reduction by 2050

Growth in UK Renewable Energy Generation 5X increase in New RE in 10 years

Obligation on electricity suppliers for a growing % of their electricity from renewable energy sources Level to rise to up to 20% by 2020 and Obligation runs to 2026-27 Accredited Renewables Generators earn Renewable Obligation Certificates for each MWh generated, which can be traded Suppliers must have the necessary number of certificates at the year end, or else pay a buy out fee (~£35.76/MWh) Buy out fees are recycled to suppliers who have met their obligation, so increasing ROC value Generators can secure medium term contracts for supply of power, ROC’s and other benefits Renewables Obligation….

Obligation on electricity suppliers for a growing % of their electricity from renewable energy sources

Level to rise to up to 20% by 2020 and Obligation runs to 2026-27

Accredited Renewables Generators earn Renewable Obligation Certificates for each MWh generated, which can be traded

Suppliers must have the necessary number of certificates at the year end, or else pay a buy out fee (~£35.76/MWh)

Buy out fees are recycled to suppliers who have met their obligation, so increasing ROC value

Generators can secure medium term contracts for supply of power, ROC’s and other benefits

ROC Values Total income = power value +ROC + other benefits = >£100/MWh = >15cents/kWh

Evolution of RO Current technology neutral regime very successful at stimulating low cost technologies (on-shore wind, landfill gas, …..) ROC Banding to bring forward broader range of technologies Multiple ROC’s from April 2009 Income up to £150/MWh Band Technologies ROC’s Technology ROC’s/MWh Landfill gas 0.25 Sewage gas, Biomass cofiring 0.50 Onshore wind, hydro, Cofiring energy crops, EfW with CHP 1.0 Off shore wind, biomass 1.5 Wave, tidal, Advanced biomass conversion (anaerobic digestion, pyrolysis, gasification), energy crops, biomass chp, PV, geothermal, microgeneration 2.0

Current technology neutral regime very successful at stimulating low cost technologies (on-shore wind, landfill gas, …..)

ROC Banding to bring forward broader range of technologies

Multiple ROC’s from April 2009

On–shore wind 2348 MW installed 300 MW in 2007, 350MW so far in 2008 Extensive Pipeline of projects 1060 MW under construction 3159 MW consented 6890 MW in planning system Delays in planning system and grid capacity being addressed

2348 MW installed

300 MW in 2007, 350MW so far in 2008

Extensive Pipeline of projects

1060 MW under construction

3159 MW consented

6890 MW in planning system

Delays in planning system and grid capacity being addressed

Offshore Wind - UK UK Potential >UK electricity demand! Projects “awarded” by Crown Estates in bidding rounds

UK Potential >UK electricity demand!

Projects “awarded” by Crown Estates in bidding rounds

First Two Rounds 18 sites, 2600 MW 15 sites, 7169 MW

Off Shore Wind - Capacity Project Pipeline 7 projects, 404 MW in operation 936 MW under construction (8 projects) 3113 MW consented UK world capacity leader Kentish Flats Project 30 3MW Turbines, commissioned 2005

Project Pipeline

7 projects, 404 MW in operation

936 MW under construction (8 projects)

3113 MW consented

UK world capacity leader

Offshore – Round 3 25GW 11 zones in areas where SEA completed Allocation in 2009 Operational by 2015 Crown Estates prepared to cofund development (up to 50% of development costs) £50Bn Investment Opportunity

25GW

11 zones in areas where SEA completed

Allocation in 2009

Operational by 2015

Crown Estates prepared to cofund development (up to 50% of development costs)

Zone Development Process Single Partner company with exclusive development rights for each Zone (individual or consortia) The Crown Estate to provide a facilitating role Partner companies to provide full development capability and resources Relationship between The Crown Estate and development partners will be through contract

Single Partner company with exclusive development rights for each Zone (individual or consortia)

The Crown Estate to provide a facilitating role

Partner companies to provide full development capability and resources

Relationship between The Crown Estate and development partners will be through contract

R3 - Key Milestones June 2008: Market announcement and publication of PIN in EU Official Journal July 2008: Industry workshops Beginning of August 2008: Invitation to submit Expressions of Interest (OJEU contract notice) End of August 2008: Closing date for Expressions of Interest – (96 EOI’s) Late September 2008: Release of Invitation to Negotiate (ITN) and key contracts Q1 2009: Responses to ITN Q2 2009: Shortlist of Partners and SEA completion Q4 2009: Completion of awards to zone partners

June 2008: Market announcement and publication of PIN in EU Official Journal

July 2008: Industry workshops

Beginning of August 2008: Invitation to submit Expressions of Interest (OJEU contract notice)

End of August 2008: Closing date for Expressions of Interest – (96 EOI’s)

Late September 2008: Release of Invitation to Negotiate (ITN) and key contracts

Q1 2009: Responses to ITN

Q2 2009: Shortlist of Partners and SEA completion

Q4 2009: Completion of awards to zone partners

EU Targets European Spring Council (2007) agreed to: Independent binding target to reduce EU’s greenhouse gas emission by 20% below 1990 levels by 2020…. … .and to increase this commitment to a 30% reduction as part of an international agreement Increase the use of renewable energy to 20% of EU energy (electricity, heat and transport) consumption by 2020 Ensure that a minimum of 10% of EU petrol and diesel consumption comes from bio fuels by 2020 Promote energy efficiency by reducing overall EU energy consumption by 20% by 2020

European Spring Council (2007) agreed to:

Independent binding target to reduce EU’s greenhouse gas emission by 20% below 1990 levels by 2020….

… .and to increase this commitment to a 30% reduction as part of an international agreement

Increase the use of renewable energy to 20% of EU energy (electricity, heat and transport) consumption by 2020

Ensure that a minimum of 10% of EU petrol and diesel consumption comes from bio fuels by 2020

Promote energy efficiency by reducing overall EU energy consumption by 20% by 2020

UK Renewable Energy Strategy UK Share of EU Target -15% of energy by 2020 Current renewables level – 1.5% of energy Challenging! Consultation to discuss how to meet the target and what policies would be needed – June 2008 Full strategy Spring 2009.

UK Share of EU Target -15% of energy by 2020

Current renewables level – 1.5% of energy

Challenging!

Consultation to discuss how to meet the target and what policies would be needed – June 2008

Full strategy Spring 2009.

The Challenge! RE % UK Energy 2006 1.4% of UK Energy

RE % UK Energy 2006

The Challenge! RE % UK ENERGY 2020 RE % UK Energy 2006 15% of UK Energy

RE % UK ENERGY 2020

Possible Technology Mix

Policy Measures Under Consideration Energy efficiency Review RO by increasing level and extending end date Regional deployment targets Grid access improvement Incentive mechanism for heat and distributed generation technologies Innovation and supply chain development

Energy efficiency

Review RO by increasing level and extending end date

Regional deployment targets

Grid access improvement

Incentive mechanism for heat and distributed generation technologies

Innovation and supply chain development

Feed-In Tariff Development Powers taken in Energy Bill Projects up to 3MW can opt for FIT rather than RO Emphasis on group/community schemes? Technology specific support levels to be agreed “ Not worse than RO” Proposals during 2009, finalised during 2010

Powers taken in Energy Bill

Projects up to 3MW can opt for FIT rather than RO

Emphasis on group/community schemes?

Technology specific support levels to be agreed

“ Not worse than RO”

Proposals during 2009, finalised during 2010

Short Term Priorities? Deployment Off shore wind √ Biomass √ Wastes √ Building √ Integrated RE and Heat (once FIT details developed) R&D,D Wave and Tidal √ PV √ Fuel Cells/H 2 √ Biofuels √

Deployment

Off shore wind √

Biomass √

Wastes √

Building √ Integrated RE and Heat (once FIT details developed)

R&D,D

Wave and Tidal √

PV √

Fuel Cells/H 2 √

Biofuels √

For further Information please contact Adam Brown @ pera .com +44 7723 315441