Posted on: 03/05/2017
Independent renewables power one in four households but growth of sector flatlines in wake of subsidy cuts. Energy entrepreneurs turn to storage as UK battery capacity poised to grow up to 100 times by 2020
Growth in independent renewable projects has flatlined after years of dynamic growth in the wake of deep and sudden subsidy cuts, reveals SmartestEnergy’s fifth annual Energy Entrepreneurs Report, released today.
Energy entrepreneurs outside the traditional electricity supply sector are now turning to the emerging storage market and are driving rapid expansion which could see commercial UK battery capacity increase as much as a hundred times by 2020.
Independent generators have invested £2.75 billion in over 6,400 solar parks, wind farms and other renewable projects, with a combined capacity of 12.75GW. Last year they supplied 8.6% of UK demand, enough to power 7.8 million homes – a quarter of all households.
Nearly two thirds of independent renewable generation, 8GW, has been built in the last four years at a cost of £1.5 billion. On average, 275 independent projects have completed each quarter since 2013, but that fell to 38 from October to December 2016 and just 21 in January to March 2017.
In a challenging market for renewables, energy entrepreneurs are now turning their attention to storage. Independent developers have won four fifths of battery contracts in Capacity Market auctions, which ensure there is enough electricity to meet peak winter demand. They secured 407MW while just 105MW went to projects from “Big 6” utilities, and the majority was secured by independents with renewable projects. Independents have also won more than half the battery contracts to provide Enhanced Frequency Response to stabilise the grid, 110MW out of 201MW.
Just 20MW of commercial batteries were operating in 2016, but 31 projects have now won long-term contracts in the capacity and EFR markets to provide 578MW of capacity in 2020. In all, 153 projects with a combined capacity of 2.3GW have announced plans for deployment over the next four years, which would see UK battery capacity increase by more than 100 times.
Government must allow renewables and storage to compete on level playing field
Iain Robertson, Vice President, Renewables at SmartestEnergy, said: “Energy entrepreneurs have demonstrated that they can build clean, renewable generation at scale, quickly and cost-effectively. To put their achievements in context, Hinkley Point C, which will power 6 million homes, is expected to cost £18 billion and take 10 years to build.
“But political support and a stable policy environment are vital, and the renewables industry has been rocked by subsidy cuts that were too sudden and too steep. Around two-thirds of existing power stations are due to reach the end of their lives by 2030, and the UK needs solutions which will keep the lights on and cut carbon while keeping electricity affordable.
“Energy entrepreneurs are at the forefront as we transition to a new energy system. Independent developers still have renewable project pipelines and are looking at innovative ways to build without subsidy. They are now also driving forward the battery revolution.
“We call on the government to recognise the role renewables and storage can play in its forthcoming industrial strategy, and to allow them to compete with traditional generation on a level playing field.”
The latest government energy projections see a greatly increased role for renewables at the expense of gas. The projection for cumulative new build renewables capacity from 2016 to 2035 rose sharply from 33GW to 45GW while new build gas fell from 27GW to 15GW.
Storage will allow the UK’s energy system to accommodate growing amounts of renewable generation and help balance supply and demand, reducing the need for fossil fuel plants to provide expensive back-up power.
However, clean technologies are not able to compete on a level playing field with the traditional supply sector. Solar is unable to bid against other power generators for contracts to supply electricity at a guaranteed price. Short-term grid service contracts disadvantage new battery projects when they compete against existing fossil fuel plants.
Solar now dominant technology after 16-fold increase in four years
The independent renewables sector has seen dramatic growth and change in the last four years.
- Solar has seen a 16-fold increase from 322MW to 5.63GW, with rapidly falling costs and technological advances making generation more efficient. It now accounts for 44% of all independent capacity.
- Onshore wind, the dominant technology four years ago, has more than doubled from 1.93GW to 4.21GW and provides 33% of independent capacity.
- Landfill gas has stalled at about 1GW, reflecting the change in how waste is managed.
Commercial developers are responsible for 38% of all projects and have built almost 10GW of capacity.
Farmers account for 21% with 1,330 projects, almost all below 0.5MW. Businesses make up 13%, investing in onsite generation projects to reduce their own utility bills.
Solar farms have become popular with investment funds seeking assets with stable, long-term returns and they acquired 459MW of projects in 2016.
But although 2016 saw 942 new independent renewable projects, more than half were commissioned by March, the deadline for small-scale Solar PV accreditation under the Renewables Obligation. Investment for the year fell sharply to £280 million, from £376 million in 2015 and £417 million in 2014.
Wiltshire was the highest-growing county for the second consecutive year in 2016, adding 126MW of capacity to become the third largest hub of independent generation in the UK, behind the Highlands & Islands and Yorkshire.
Of the 2.3GW of planned battery capacity, a quarter (594MW) is due to be built in Kent and 11% in Yorkshire, counties with some of the highest levels of independent renewables in the country.