Industry unable to meet UK demand for renewable power

A growing gap is emerging between supply and demand for electricity produced from renewable energy sources in the UK with production expected to fall short in 2007, according to a survey by Datamonitor.

Demand for electricity produced from renewables such as wind power is expected to surge this year with UK businesses planning to buy some 34 TWh of ‘green’ electricity in 2007, according to a Datamonitor survey of 3,500 of the UK’s largest energy buyers, published on 29 March.

“UK businesses are increasingly focused on sourcing premium renewable electricity,” the survey found, with 28% of companies now having a goal for green electricity consumption in 2007 – up 7% on 2006.

However, production in 2006 only reached 12 TWh, leaving a potential gap of 22 TWh for 2007, the survey found. 

“Internal company targets will be very difficult to meet,” analysts at Datamonitor said. “Ultimately, increasing demand for green energy is not being met by new capacity.”

European objectives on renewable power have pushed the UK to force electricity suppliers to source part of their production from wind, solar or biomass and attest the origin of the power with a ‘green certificate’.

But the Renewables Obligation (RO) scheme is failing to deliver at the rate the market is demanding, with the UK generating 13.7 TWh of accredited electricity in 2005-06, some 24% short of the scheme’s 18 TWh target.

According to the survey, ambiguities in the way electricity is labelled 'green' are creating difficulties for large energy buyers, who are not always sure what form of green power they are actually purchasing.

"For example, the same MWh of power that generates a Renewable Obligation Certificate (ROC) may also create Levy Exemption Certificate (LEC) from the Climate Change Levy (CCL) – a business tax on energy use," said Paul Stewart, energy and utilities analyst at Datamonitor.

"Rising UK demand for green energy is not a strong enough incentive alone to bring sufficient renewable generation capacity online," Stewart said. "With the RO scheme, ultimately, struggling to deliver this as well, UK businesses should be clear on exactly where their 'green' electricity is coming from," he added.

France's drive to have its vast nuclear fleet included in an EU initiative to produce 20% of electricity from renewable sources by 2020 only adds to uncertainties – especially if expected new nuclear power stations in the UK are also marketed in this light, Stewart said.

The EU currently has a target to meet 12% of its overall energy needs from renewables with a specific target of 21% for electricity to be met by 2010. 

Earlier this month, EU leaders agreed to push for an even more ambitious goal, deciding to raise the overall objective to 20% by 2020. However, the specific target on renewable power was dropped in the agreement to allow EU countries more flexibility to achieve the overall objective.

  • Sept. 2007: Commission expected to put forward proposal for a comprehensive directive on renewable energies.
  • By end 2007: Commission to produce report and review the need for harmonisation of support mechanisms for renewable electricity.

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