Plans unveiled last week (17th April) are looking into a significant adjustment to the government's flagship renewables programme that aims to assist additional investment in the deployment of renewable energy sources and enhancing energy security. The government uses the Contracts for Difference (CfD) programme and FIDER (Final Investment Decision Enabling for Renewables), an earlier version of the programme, to support new low-carbon electricity generation projects in Britain. Together, they have awarded contracts to projects with a combined capacity of 26.1 GW.[i] Since the first auction was held, the scheme's competitive nature has successfully put downward pressure on prices, resulting in a nearly 70% decrease in the cost of offshore wind energy per unit (MWh) between 2015 and 2022.[ii] Contracts for Difference are now given out based on the bid prices offered by renewable energy generating facilities with the goal of boosting deployment, ensuring good value to electricity users, and eventually bringing costs down. The government is now looking for data to support the idea that proposals should be evaluated not only for their capacity to deliver low-cost renewable energy deployment but also for how much a project will benefit the overall health of the renewable energy sector. These changes might require bidders to take into account total costs as well as "non-price factors" such as supply chain sustainability, filling skills gaps, and innovation when submitting their proposals, which it is thought will encourage investment in the sector and increase the nation's energy security.[iii]
According to The Energy Transition and Jobs, a study that expands on PwC's Green Jobs Barometer, there are 270,000 skilled people who can be transferred from the oil and gas industry in the UK. However, by 2030, almost 20% of this group is anticipated to have retired, leaving just 216,000 transferrable people to fill the 400,000 jobs required to create a workforce capable of producing net zero energy in nearby industries like nuclear, hydrogen and renewables. The findings imply that the severe lack of skilled workers will limit the growth of renewable energy production.[iv]
According to McKinsey, the anticipated global power generation from committed solar and on- and offshore wind projects will more than quadruple, from 125 gigawatts to 459 gigawatts, between 2021 and 2030 (excluding China). As nations attempt to include renewables in their plans to address the present geopolitical energy crisis, this could increase even more. Stable markets and resilient supply networks are necessary for rapidly expanding. Because of erratic variations in raw material supply and prices, as well as frequent regulatory changes, the market for renewable energy has recently been highly volatile. Long-term capacity planning and the practice of securing acceptable prices for significant amounts of raw materials have become exceedingly challenging due to this lack of continuity.[v]
Waste generated by the construction and usage of infrastructure for renewable energy sources is rich in resources. It contains rare earth elements and other materials like steel, copper, and glass. The rapid advancement of technology makes it possible for equipment to experience relatively quick expiration and to produce complicated waste streams, posing technical and logistical difficulties for managing this infrastructure at the end of its useful life. Complex logistics (large volumes of material frequently required to be retrieved from remote locations), design that does not take end of life or recyclability; and the existence of hazardous materials are problems when recovering materials and reintroducing them into the manufacturing cycle.[vi] Although the life-cycle CO2 intensities of clean energy technologies are much lower than those of their fossil counterparts, their supply networks are nevertheless a significant source of CO2 emissions and other pollutants. Over 90% of the emissions for the supply chains of clean energy technology examined are typically accounted for by material production and technology manufacture. Given the current scarcity of commercially accessible low-emission technology in many circumstances, reducing emissions from these steps is a difficult but crucial task in the move towards net zero emissions.[vii]
The proposed changes to the CfD system centre around developing a points-based system that rewards non-price factors, increasing the likelihood of a bidder succeeding in the pursuit of a contract. This point system has areas that are targeted at the challenges of skill gaps, sustainability and capacity building.
The call for evidence on these reforms will run until the 22nd of May, 2023. If indeed the evidence suggests that non-price factors would serve as an effective policy to develop solutions for the challenges faced by the renewable energy sector, then perhaps the process could be applied to other areas that are facing roadblocks in their path to net zero.
[i] Department for Energy Security and Net Zero- Government explores major reform to flagship renewables scheme to improve energy security and drive investment
[ii] Department of Business Energy and Industrial Strategy- Evaluations of the contract for difference scheme
[iv] PWC- The Energy Transition and Jobs
[v] McKinsey- Renewable-energy development in a net-zero world: Disrupted supply chains
[vi] European Environment Agency- Emerging waste streams: Opportunities and challenges of the clean-energy transition from a circular economy perspective
[vii] IEA- Clean energy supply chains vulnerabilities
[viii] Department for Energy Security and Net Zero- Contracts for Difference for Low Carbon Electricity Generation: Call for Evidence on introducing non-price factors into the Contracts for Difference Scheme
[ix] Ibid
[x] Ibid
Oscar is a recent graduate with a background in earth science. He is currently studying an MSc focussing on disaster responses, emergency planning and community resilience. His postgraduate research project will assess the link between climate crisis risk perception and attitudes to green energy projects. “Adapting to the climate crisis through the pursuit of net zero requires community engagement and understanding. Zero Carbon Academy’s goals closely align with this approach and I’m excited to have the opportunity to research and communicate a variety of topics relating to our environment and sustainability”.
