Current UK Strategy and Performance John Pietryszak Head of New - - PowerPoint PPT Presentation

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Current UK Strategy and Performance

John Pietryszak Head of New Business Development ScottishPower Energy Retail

19 March 2009

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Agenda

• Energy Policy
• Impact and Opportunity
• Review of Delivery Mechanisms

– The Renewables Obligation – Energy Efficiency – Community Schemes – Distributed Solutions

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Energy Act

• Translating the 2007 Energy White Paper

into legislation

• Covering all aspects of energy policy,

including; Upstream gas, Nuclear, Carbon Capture and Storage, Renewables etc.

Energy Policy

Climate Change Act

• The Act aims to improve carbon

management and help transition towards a low carbon economy

• Demonstrate international leadership
• Set 5 year carbon budgets, with the first

three set this year for 2008 to 2022 Renewable Energy Strategy

• The RES considers measures required to

meet the 15% renewables target by 2020

• Providing financial incentives in support of

renewable technology

• Targeting electricity, heat and transport

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Emerging UK Generation Gap

Closing the gap: Evolution of existing UK capacity

Requires largest generation investment programme in UK history Requires largest generation investment programme in UK history

N u clear Coal CCG T O CG T an d oil H y dro R en ew ables

10 20 30 40 50 60 70 80 90 2008 2009 2010 2011 2012 2013 2014 2015 2016

Peak Demand Peak Demand + 25%

44GW

UK Generation Installed Capacity (GW)

• Coal life extension
• New build renewables, gas, nuclear
• Carbon capture & storage?
• Certainty over returns more critical

than ever

• The planning process needs to

support the ambition

• Demand side policy fails to deliver

its side of the equation

Risks:

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Key Technological Impacts: Power

• Nuclear rebuild
• Coal

environmental & efficiency investments

• Carbon, capture

& storage

• Renewables

technologies & growth

• Nuclear rebuild
• Coal

environmental & efficiency investments

• Carbon, capture

& storage

• Renewables

technologies & growth

Generation Tradin g Trans- mission Tradin g Metering Trading Dist- ribution Supply

• Trading

exchanges merging

• Trading

exchanges merging

• Grid

reinforcement

• Offshore

transmission

• Electricity

storage

• Grid

reinforcement

• Offshore

transmission

• Electricity

storage

• DG

connections

• Performance

improvements

• Asset

replacement and renewal

• Active

networks

• Smart Grids
• DG

connections

• Performance

improvements

• Asset

replacement and renewal

• Active

networks

• Smart Grids
• Smart Meters
• Smart Meters
• Demand

management

• Microgeneration
• Electric Vehicles
• Demand

management

• Microgeneration
• Electric Vehicles

Significant changes to the power supply chain include:

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The Renewables Obligation

ScottishPower part of world’s largest renewable company

Beinn Tharsuinn Cruach Mhor Whitelee Black Law Shell Flats Dun Law Hare Hill Hagshaw Hill Coal Clough P&L Carland Cross Barnesmore Elliots Rigged Hill Beinn an Tuirc Corkey Operational Under Construction Phase I Development Wether Hill Phase II Development Ewe Hill Harestanes Greenknowes Dersalloch Coldham Callagheen West of Duddon Arecleoch Lynemouth Beinn Tharsuinn Cruach Mhor Whitelee Black Law Shell Flats Dun Law Hare Hill Hagshaw Hill Coal Clough P&L Carland Cross Barnesmore Elliots Rigged Hill Beinn an Tuirc Corkey Operational Under Construction Phase I Development Wether Hill Phase II Development Ewe Hill Harestanes Greenknowes Dersalloch Coldham Callagheen West of Duddon Arecleoch Lynemouth

• UK’s largest onshore wind farm owner/developer
• 17 windfarms, over 380MW operating capacity
• Over 400MW in construction including:
• Whitelee 322 MW, largest in Europe
• Over 800 MW in planning

The impact of the RO in the UK

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The Renewables Obligation – Capability 2020

Technology Projected Capability Potential Capability Supporting Policy Measures Onshore Wind 24Twh 30–33Twh

Strengthen RO Transmission access overhaul Reform the planning process Technical radar solutions

Offshore Wind 22Twh 36-40Twh

Strengthen RO Offshore grid regime established Early and rigorous MoD consultation Early and rigorous shipping consultation

Bio Gas 9.4Twh 14-16Twh

Accreditation of imported materials Co-firing support external to RO

Wave / Tidal / Hydro 5.7Twh 10-15Twh

Reform MRDF Flexible grid access rules Transform planning process

TOTALS 90-103Twh 28%

The addition of the Thames Barrage Could add a further 17Twh or 5%

61Twh 17% demand

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Current demand side policy Energy Efficiency

Industry performance from Energy efficiency

• Energy efficiency programmes in operation from 1994
• Total energy savings from 2002 equates to 13.5Twh
• Almost 6,000,000 houses insulated over the programme
• Energy efficiency programmes transformed UK appliance

standard, however, there has been no effect on micro generation

ScottishPower 1st to meet its carbon targets through the Energy Efficiency Commitment

• Complete 2005-08 obligation 1 year ahead of target
• Only company to trade savings as part of the obligation
• Insulated over 500,000 houses over the 3-year programme
• Issued over 7,500,000 energy efficient light bulbs
• Only company to outsource the entire obligation to a third

party service provider

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Current demand side policy Energy Efficiency

• The programme is run as an obligation on suppliers to

achieve target savings from lowest cost measures

• No customer pull for wider energy services, with no market

created for innovative solutions

• All low cost cost insulation measures will be complete by

circa 2015

• The programme doesn’t identify the whole house needs,

focussing only on lowest cost solutions to meet a target

• Conflict of interest between energy and social policy
• Although it has many issues, overall the programme has

been the most effective of its kind, delivering lowest cost carbon abatement of circa £28/tonne CO2 predicted for the next 3years

• To be fully effective there is a need for an obligation or

incentive on the domestic consumer to build on the energy efficiency measures and make sustainable changes to their behaviour

• There must be a separation of environmental and social

policy if either is to be addressed

• The programme has been run in 3-year segments with no

long term certainty, there is a need for longer term targets with over & under carry between phases

Concerns over the design of the current Demand side management programmes for energy efficiency ScottishPower challenges to the current policy design

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New demand side policy Community Schemes

The new Community Energy Saving Programme is designed to tackle areas with high index of multiple of deprivation

• CESP is a programme aimed at tackling hard to

treat homes where consumers are most likely to be fuel poor

• Schemes are based on a community approach with

local authorities having a key role

• Suppliers and generators are obligated to meet

carbon targets, with higher scores available for whole house approach

• Given the social nature of the obligation consumers

are likely be given the measures free of charge

• The new CESP obligation will not create a market

for suppliers or generators to compete within

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New demand side policy Community Schemes

• If correctly designed, CES

P could provide a model targeting the social elements of the government policy

• The government announced the CESP obligation in

September 2008,without any detailed understanding of how it would operate

• With an expected start date of Autumn 2009, there is still

uncertainty over the shape and detail of the obligation, we are concerned that there is limited time to address

• The current design places a high administrative burden on

both those obligated and the Regulator

Concerns over the design of the current Demand side management programmes for community schemes

• We support a community based approach tackling social

issues outside of the main Energy Efficiency Policy

• The risk associated with the uncertainty of potential scores

for schemes needs to be removed from the design

• Given the speed of introduction and uncertainty over

measure scores, the fine for non compliance needs to be removed from the first phase of the obligation

ScottishPower challenges to the current policy design

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New demand side policy Distributed Solutions

Renewable heat incentives and feed in tariffs

• Setting the incentives will be critical in ensuring sufficient

market drivers without overheating market

• The scheme design needs to facilitate a market that

creates value for consumers and suppliers

• Being overly prescriptive will stifle innovation and product

differentiation

• A programme of consumer education should go alongside

any other programme

• The social impact of all environmental policies needs to be

understood

• Consultations on both schemes are expected later in the

year

ScottishPower will look to use its expertise in both renewables and energy retail to develop innovative solutions for

• ur customers