As we issue our Baseline Long-term Roc Forecast for 2018, we take the opportunity to reflect on key trends seen in the renewables market and look at how the impending deadline for projects to accredit under the Renewables Obligation (RO) may impact capacity levels over the coming compliance periods (CPs).
Capacity set to reach 32GW
The RO closed to new capacity from 31 March 2017; however, depending on technology type and eligibility, projects may accredit until 31 January 2019 in GB and 31 March 2019 in NI through grace periods. We continue to see a steady flow of projects accrediting under the RO, with Roc issue in the eight months of CP16 (2017-18) exceeding more than 60mn Rocs – up 14.7% compared to the same period last year. Offshore and onshore wind farms recorded the largest increase, with newly accredited farms Race Bank, Galloper and Rampion, adding around 1,300MW of capacity in CP16.
Threats to offshore wind
Despite the increasing number of wind projects accrediting under the RO, ministers have been warned that the development of offshore wind projects in the UK could be at risk due to the removal of subsidies. It has been reported that industry leaders have said that at least two proposed floating wind farms off the Scottish coast will not go ahead unless the October deadline for support through the RO is extended. These are the 60MW Forthwind and 10MW Dounreay Tri projects, neither of which are expected to be generating electricity by the deadline. The trade association RenewableUK is therefore calling for an 18-month extension to the scheme, taking it to April 2020. Maf Smith, Deputy CEO of Renewable UK, explained: “Without this first group of projects we will not be able to build UK expertise and that would be a huge lost opportunity”.
Some capacity nearing end of life
While we move closer to the deadline for stations to accredit under the RO, we expect overall capacity levels to decline after CP17 (Figure 1). This is due to an expected fall in landfill gas as sites are able to yield less gas. Furthermore, after the scheme opened in 2002, the first projects to accredit under the RO will reach the end of their support in CP20 (2021-22).
It looks as if some of these earliest RO projects will soon consider repowering subsidy free once their RO support ends. This is something we will be tracking closely.
Scheme costs remain uncertain
Despite an imminent deadline for accrediting projects under the RO, the scheme remains subject to some uncertainty. Energy intensive industries (EII) will be exempt from up to 85% of the RO from April 2018, and although BEIS estimates this to apply to 11.7TWh of electricity, the exact amount of exempt supply remains unknown.
Furthermore, the government recently announcement that it will consult on widening the eligibility criteria for EII exemptions in the Industrial Strategy. It said this will address “potential intra-sectoral competitive distortions, taking into consideration their impact on consumer bills”. This will have the potential to push up the costs of the scheme on some consumers’ bills in the future.
The Long-term Roc Forecast provides future Roc values, as well as providing insight of how the costs of the RO may impact on supply businesses and energy bills out to 2027. If you would like to know more, please contact us at enquiries@cornwall-insight.com.