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Renewable energy has become an increasingly important issue in the UK, as the country seeks to reduce its carbon emissions and transition to a more sustainable energy system. However, there are a number of laws and regulations that have been identified as hindering the promotion of renewable energy in the country. These include planning and permitting requirements, challenges with grid connection, changes to subsidies and incentives, energy market design, and a complex regulatory framework. In addition, there is a lack of long-term planning for renewable energy promotion in the UK, which has led to uncertainty and instability for investors and developers (Bray, Woodman and Connor, 2018).
The Town and Country Planning Act 1990 requires renewable energy projects to obtain planning permission, which can be a lengthy and expensive process. The process can be overly complex and bureaucratic, making it difficult for developers to secure planning permission for renewable energy projects. Obtaining planning permission and permits for renewable energy projects can be a major barrier to development. For instance, environmental activists challenged a proposed Viking wind farm in the Shetland Islands which delayed the project due to concerns about its impact on local bird populations (Viking Energy, 2022). The developers had to conduct additional studies and make changes to the project before it was approved. Planning regulations for renewable energy projects are often more stringent than those for fossil fuel projects, which can make it more difficult for renewable energy projects to obtain planning permission (Beck, 2004).
The Electricity Act 1989 established the current energy market structure in the UK, which is designed to favor large, centralized power plants (Bray, Woodman and Connor, 2018). Critics argue that this has made it difficult for small-scale renewable energy projects to compete in the market. A significant predicament arises with the commercialization of renewable energy (RE) due to the potential of attracting investors primarily focused on secure returns, as opposed to entrepreneurial advancements aimed at reducing costs over time (Whitmill, 2012). In situations where compensations are not ensured, organizations are compelled to think creatively to guarantee profitability, whereas guaranteed recompenses could impede this endeavor.
The Capacity Market is a government scheme that pays fossil fuel power plants to be on standby, ready to generate electricity when demand is high. This scheme has made it difficult for renewable energy sources to compete with fossil fuels, as it has created a guaranteed revenue stream for fossil fuel plants, making it harder for renewable energy sources to enter the market (Aagaard and Kleit, 2022).
The Feed-in Tariffs (FIT) Scheme which was introduced in 2010 and closed to new entrants in 2019, provided subsidies to small-scale renewable energy projects, such as rooftop solar panels (Zhang, 2013). While the scheme was successful in promoting investment in renewable energy, there is a positive correlation between higher feed-in tariffs and higher system costs, which can ultimately impede the growth of the renewable energy industry by limiting its ability to expand its capacity (Leiren, Inderberg and Rayner, 2020).
Connecting renewable energy projects to the grid takes lengthy duration and cost for PV grid access (Banasiak, Najdawi and Tiik, 2022). For example, in 2019, Scottish Power Renewables faced delays in connecting its 714 MW East Anglia ONE offshore wind farm to the grid due to issues with the National Grid’s cable network. Renewable energy generators must pay grid connection charges to connect to the electricity grid. These charges are often high and can be a barrier to entry for small renewable energy generators.
In addition, there has been a lack of long-term planning for renewable energy promotion in the UK, which has led to uncertainty and instability for investors and developers. The UK government delayed the publication of its Energy White Paper, which sets out its long-term energy policy, leading to concerns about the future direction of renewable energy policy in the country. The level of government support available for renewable energy projects has been subject to change, creating uncertainty for investors and developers. In 2015, the UK government cut subsidies for onshore wind farms, leading to a decline in new projects (BBC, 2015).
Moreover, the UK regulatory framework for renewable energy is complex and can be challenging to navigate for developers and investors. There are various regulatory bodies involved in the promotion of renewable energy, including the Department for Business, Energy and Industrial Strategy (BEIS), the Office of Gas and Electricity Markets (Ofgem), and the Energy Systems Catapult (Raybould et al., 2019). These bodies have different responsibilities and powers, which can make it difficult to establish a clear and consistent policy direction for renewable energy.
To address these issues, there have been calls for a more streamlined regulatory framework for renewable energy in the UK. This could involve the consolidation of regulatory bodies and the creation of a dedicated regulatory body for renewable energy, which would be responsible for overseeing the promotion and development of renewable energy projects. This would provide greater clarity and consistency in renewable energy policy and reduce the bureaucratic burden on developers (Leiren, Inderberg and Rayner, 2020).
In addition, the UK government has to provide greater long-term support for renewable energy projects. This could involve the introduction of a new subsidy scheme for renewable energy or the extension of existing schemes, such as the Contracts for Difference (CfD) scheme. A long-term support scheme would provide greater certainty for investors and developers, and encourage the growth of the renewable energy industry in the UK.
Furthermore, the UK government should focus on reforming the energy market to promote greater competition and support for renewable energy projects. This could involve the introduction of a market-based mechanism to support renewable energy, such as a carbon price floor (Seetharaman et al., 2019), which would provide a financial incentive for the use of low-carbon energy sources. This would help to level the playing field between renewable and fossil fuel energy sources and encourage greater investment in renewable energy.
In conclusion, while renewable energy has become increasingly important in the UK, there are a number of laws and regulations that have been identified as hindering its promotion and development. These include planning and permitting requirements, challenges with grid connection, changes to subsidies and incentives, energy market design, and a complex regulatory framework. To address these issues, there is a need for a more streamlined regulatory framework, greater long-term support for renewable energy projects, and reform of the energy market to promote greater competition and support for renewable energy. By taking these steps, the UK can achieve its goal of reducing carbon emissions and transitioning to a more sustainable energy system.
A Contract for Difference (CFD) is a financial instrument used in the UK to support low-carbon electricity generation. In the energy sector, a CFD is a long-term contract between a low-carbon electricity generator and the government’s Low Carbon Contracts Company (LCCC). The CFD scheme has supported 42 projects providing 10GW of renewable energy in 2018 and this figure is increasing annually (UK Government, 2018).
Under a CFD, the LCCC guarantees a fixed price for the electricity generated by the low-carbon generator for a specified period, usually 15 years. If the market price for electricity is lower than the fixed CFD price, the LCCC pays the generator the difference. If the market price is higher, the generator pays the difference back to the LCCC (UK Government, 2018).
The aim of the CFD scheme is to provide stable and predictable revenue streams for low-carbon electricity generators, which helps to reduce the risks associated with investment in new low-carbon energy infrastructure (Monahan and Beck, 2023). This, in turn, helps to reduce the cost of low-carbon electricity generation and meet the UK’s climate change targets.
CfDs have been successful in promoting renewable energy investment in the UK. The scheme has helped to drive down the cost of renewable energy projects, making them more competitive with fossil fuels (Onifade, 2016). The CfD scheme provides stability for renewable energy investors by guaranteeing a certain level of revenue for a set period of time. This stability can help to attract investment in renewable energy projects, even during times of market uncertainty. However, the current energy crisis caused by rising gas prices has led to a surge in demand for electricity, which has pushed up wholesale electricity prices. As a result, some renewable energy generators with CfD contracts have been paying the government back, rather than receiving payments (Monahan and Beck, 2023). This has raised concerns about the effectiveness of the CfD scheme in promoting renewable energy in the current energy crisis. Nonetheless, CfDs remain a useful tool for incentivizing investment in renewable energy projects in the longer term.
The CfD scheme is technology-neutral, meaning that it can support a range of renewable energy alternatives, including wind, solar, and biomass (Judd, 2021). This flexibility can help to ensure that the UK has a diverse mix of renewable energy sources, which can help to reduce the risk of supply disruptions during the energy crisis. The CfD scheme also promotes innovation in renewable energy technologies by providing incentives for companies to develop new and more efficient technologies (Onifade, 2016). This can lead to the development of new, more affordable renewable energy sources, which can further reduce the cost of low-carbon electricity generation and help the UK meet its climate targets.
One significant example of the success of the CfD scheme in promoting renewable energy investment in the UK is the Hornsea One offshore wind farm, located off the coast of Yorkshire. The wind farm, which began operating in 2019, has a capacity of 1.2GW and is the largest offshore wind farm in the world. The project was supported by a CfD contract, which guaranteed a fixed price for the electricity generated by the wind farm for 15 years. This stability helped to attract investment in the project, which was developed by Ørsted (Orsted, 2022).
In addition to offshore wind, the CfD scheme has also supported investment in other renewable energy technologies. For example, the Drax power station in Yorkshire has converted three of its six generating units to burn biomass instead of coal, with the support of a CfD contract (Lewis and Gorton, 2017). This has helped to reduce the carbon emissions of the power station, while also providing a stable revenue stream for the biomass suppliers.
Besides promoting renewable energy investment, the CfD scheme has also contributed to the adoption of new low-carbon energy technologies and creation of jobs in the sector. The implementation of these technologies can create opportunities for innovation, research and development, and advancement in energy systems (International Energy Agency, 2019). This can help to support the growth of the low-carbon energy sector, which in turn can provide benefits for local economies and employment opportunities for individuals in the UK.
Overall, the CfD scheme has been successful in promoting renewable energy investment in the UK, helping to drive down the cost of renewable energy and reduce the country’s carbon emissions. While the energy crisis of 2022 has raised some concerns about the effectiveness of the scheme, it remains an important tool for incentivizing investment in low-carbon energy infrastructure in the longer term.
References
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