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July 7, 2006

Carbon Trust Calls for Urgent Changes to Britain's Renewable Obligation


 

Britain's Carbon Trust has issued a stinging report on the the country's Renewable Obligation and the likely failure of the RO to reach the UK's renewable target. And in a dramatic departure from past British policy the Trust recommends that the country switch to a form of renewable tariffs similar to those used on the continent.

Significantly, the report Policy frameworks for renewables Analysis on policy frameworks to drive future investment in near and long-term renewable power in the UK says "not only are targets being missed, but the cost of installed renewable energy is higher than necessary." The Trust goes to say it "believes that the Renewables Obligation (RO) should be reformed or replaced."

Why this is significant is because Britain's Renewable Obligation, also known variously as a quota model or Renewable Portfolio Standard, is singled out by advocates as one of the best examples of a successful quota model. While Britain did not originate the idea of porfolio standards, it is one of the main proponents of such systems.

Critics have charged for some time that in fact Britain's RO is an example of why RPS or quota models are inferior on several grounds to electricity Feed Laws and specifically Advanced Renewable Tariffs. Two principal complaints are that quota models are difficult to tailor to different technologies and to different resource densities. Moreover, quota models favor multinational corporations and offer little opportunity for participation by landowners and urban residents alike.

The Trust's report goes to say that "The full potential of renewables will only be achieved through a policy framework that supports several different renewable technologies at the same time. The RO in its current form cannot achieve this. The Carbon Trust believes that a switch to a Renewable Development Premium would deliver the most renewable electricity at the lowest cost. This would offer a fixed tariff on top of the wholesale electricity price to each technology depending on their level of commercialisation, which would be reduced over time as the technology matures and costs decline."

For a non-academic institution, the Trust's report makes the strongest statement yet in support of Renewable Tariffs or Feed Laws like those used on the continent.

"The most efficient option in terms of cost per unit of energy and achieving maximum offshore wind capacity by 2015 involves moving away from the current RO towards a fixed mechanism, such as a Renewable Development Premium. Feed-in tariffs have been proven to be successful elsewhere30 (for example, Spain and Germany) in generating significant deployment of lower cost renewable energy. A fixed mechanism addresses both the time delay of the RO and the leakage associated with transferring the regulatory risk to the private sector. It is the most efficient policy mechanism in terms of funding requirement per unit of renewable energy."


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