4th September
2015
A smarter Energy Future for
Wales
Dear Sir / Madam
Thank you for providing us with the
opportunity to respond to the above consultation.
This response is on behalf of the all RWE
companies operating in the UK and we welcome this opportunity to
engage in working with the Assembly on matters of Welsh energy
policy.
Within the UK, RWE Generation operates and
manages a flexible portfolio of coal, oil, biomass and gas-fired
power stations, producing more than 10% of electricity used in
Great Britain. We also manage a portfolio of cogeneration plant. In
the UK, RWE Innogy is at the forefront of producing energy through
renewables sources. The gross operational renewable generation
portfolio that RWE Innogy are involved in totals near 2,000MW
across UK wind farms, hydro plants and biomass generation.
Specifically within Wales, we generate
electricity at Aberthaw Power station (coal) and Pembroke Power
Station (gas) as well as from 890MW of renewable generation plant, making RWE the
largest generator of electricity in Wales.
Our retail business, RWE npower supplies ca.
5.4m residential and non-domestic customers with energy, energy
efficiency and holistic energy solutions, including Energy
Performance Contracts. RWE npower is committed to providing
our customers with innovative products and services which
support and deliver more energy efficient outcomes. We have a long
history of delivering energy efficiency measures in Wales under
EEC1, EEC2, CERT, CESP and now ECO. In April, npower Business
Solutions bought RUMM, the specialist Welsh energy management
company as part of our broader strategy of helping our larger
customers better manage and control their energy usage.
- The Energy Mix (decarbonisation and energy
mix
1.1 Efficient delivery of
carbon reductions within the electricity sector
Having invested heavily in both renewable
energy generation and high efficiency fossil fuel generation in
Wales, we are fully supportive of efficient measures to mitigate
the damaging impacts of climate change.
Whilst there is a clear role for national,
regional and local measures in sectors falling outside the Traded
sector of the EU ETS, we believe that climate change management
at regional level is potentially inefficient and sub-optimal for
consumers who will have to pay through their energy bills or taxes.
Costs of decarbonising electricity should be optimised at a UK
level and carbon pricing should be at EU level and ultimately at
the global level to ensure emissions reductions are delivered at
least cost.
We are supportive of a strengthened and
properly functioning carbon market through the EU Emissions Trading
Scheme and welcome the establishing of a Market Stability Reserve
and the recent legislative proposals from the European
Commission.
1.2 Renewable
electricity generation deployment
It is welcome
that The Environment (Wales)
Bill 2015 sets a 2050 emissions reduction target and five-yearly
carbon budgets and
complementary progress reviews. However, because to date Wales has
fallen short on reducing carbon emissions at the necessary pace,
there is an urgent need for significant new deployment of readily
available emission reduction solutions. Figures in the latest
Climate Change annual
report show against the
(non-statutory) target of a 40% cut in emissions by 2020, the level
of reduction achieved so far falls well short of what is required
with emissions from Wales rising between 2011 and 2012 (the most
recent year for which statistics are available). Emissions in
2013 are forecast to show an even bigger increase due to a 20%
increase in emissions from the energy sector. The Welsh energy mix should shift towards an
increased share from renewables and gas. This should be in
conjunction with improved energy efficiency and emission reductions
from the heat and transport sectors.
1.3 Overcome existing barriers to the deployment of
renewable electricity:
Whilst we are of
the view that grid access should be equal for all users, there are
a number of barriers in place that slow the rate of power sector
emissions reduction. The consenting process for UK renewable energy
projects and new grid infrastructure is slow and costly, thus
moderating deployment.
Regarding the
barriers in the planning process we see a chance for National
Assembly to step in and determine NSIP 132kV grid connections. With
DECC handing back planning to local authorities in England, there
is an opportunity for National Assembly to have a say over Section
36 and NSIP projects in Wales.
A key barrier to additional deployment is central UK
Government policy on renewables. Investor confidence is being
harmed by the UK Government approach to renewable energy especially
relating to recent measures relating to solar and onshore
wind. The potential for onshore wind and solar PV to be ineligible
for participation in future Contracts for Difference is a
particular risk, especially given to potential for these low cost
renewable technologies to operate under a subsidy free
CfD.
There is a clear role for the National Assembly to
work with Westminster to explore such mechanisms, particularly in
promoting a subsidy free CfD for onshore wind.
1.4 What mixture of distributed generation resources
best meets Wales' renewable energy needs in respect to the supply
of a) electricity, b) gas, and c) heat?
Whilst we have
no particular view of the best balance between electricity, gas and
heating sectors in Wales, we believe there is a key role for the
National Assembly to:
- Further promote
energy efficiency;
- Secure
contributions from the heat and transport sectors;
- To support a
properly functioning carbon market through a reformed EU Emissions
Trading Scheme; and
- To support the
ongoing deployment of renewables
- The grid
The grid
infrastructure in Wales is at capacity. Both distribution and
transmission connections require large financial commitments on the
part of developers and can take many years to complete. This access
along with associated cost of consenting and time to construct are
barriers to deployment of all energy projects.
One critical
lesson to be learnt from the TAN8 process is that if any future
strategic search areas for renewables are designated these should
consider access to existing grid infrastructure so that the length
of new lines and the cost of reinforcement works is considered
alongside other factors. What is needed is strategic planning
of upgrades to the grid network – outside and independent of
the development process - in parallel with strategic planning of
the changes to the renewable energy generation mix.
- Storage
Whilst we have
no particular comments, we welcome innovation in this area and are
keen to see cost reduction in storage solutions in order to enable
their wider deployment at both large and small scale.
- Ownership (public and community ownership
of generation)
Given recent UK policy announcements and barriers to
investment in renewables, community investment within the renewable
electricity sector appears challenged, despite considerable
previous effort in encouraging shared community ownership of
renewable generation.
However, the investigation in Wales of the
desirability and feasibility of community investment , given these
constraints would be welcome.
- Energy efficiency and demand
reduction
Whilst we have no
detailed comments on the planning system or impacts of a higher
energy efficiency standard in Wales for new housing, we are very
supportive of the proposed Energy Efficiency strategy for Wales as
proposed by the Welsh Government and look forward to working with
the Welsh Government to deliver on its vision for Wales of ensuring
Wales can meet its full energy efficiency potential and become a
major exporter of energy efficiency technology and
know-how.
Within the Welsh Government’s
Consultation we note that the proposed strategy will cover a ten
year timeframe. We agree and support this intention to set out a
longer term framework given that some of the key enablers for
greater energy efficiency will be realised over the medium term
(including the roll out of smart metering and the development of
smart grids and a broader transition to half hourly settlement for
electricity).
RWE npower agrees with the approach proposed
by the Welsh Government, whereby tackling the barriers to energy
efficiency will be addressed through a multi-agency and partnership
approach; understanding that different customer segments and
sectors all have different needs, different levels of engagement
regarding the benefits of improved energy efficiency and that these
require diverse approaches and differing and tailored levels of
support. Furthermore RWE npower remains very supportive of the
Welsh Government’s approach to continue to provide additional
funding for support and measures to improve energy efficiency
through the Welsh Government Warm Homes Nest and
Arbed.
Since the publication of the consultation,
we note the announcements that no further funding will
be made available to the Green Deal Finance Company, likely
resulting in its closure and that there is to be an independent
review undertaken by Dr Bonfield (into standards, consumer
protection and enforcement of energy efficiency schemes). Until
this review is completed and there is clarity as to what any future
framework for financing, consumer protection and managing energy
efficiency improvements may comprise, it is unclear to what extent
this may impact the proposals to support the take up of energy
efficiency measures amongst the able to pay. From that perspective,
we are particularly supportive of research into the
feasibility and potential impact of establishing a paid for service
that facilitates the assessment and installation of energy
efficiency improvements for middle and higher households and would
welcome the opportunity to understand the research parameters and
its future outputs.
- Communities - making the case for
change
We have no additional comments
Yours faithfully
Paul Mernagh
Policy Adviser
RWE npower (on behalf of RWE
operating companies in the UK)
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