Electricity generation
How is electricity generated?
Which fuels are used to generate electricity in the UK?
What is the thermal efficiency of thermal generating technologies?
Will different fuels be used to generate electricity in future?
What is CHP?
How much electricity is generated in the UK?
Can the UK import electricity from abroad?
Electricity industry
How is the electricity industry structured?
How is electricity traded?
What is ELEXON?
Who are National Grid?
Who regulates the electricity industry?
Which trade associations represent electricity generators?
Who operates my local electricity network?
How do I change my electricity supplier?
Power stations
Who owns the power stations in the UK?
How many power stations are there in the UK?
Is there a list of power stations in the UK?
What is the average load factor in the UK?
What is the plant margin in the UK?
How do I build my own power plant?
What is a section 36 consent?
Emissions
How much carbon dioxide is emitted from electricity generation?
Where can I find out about emissions from individual power stations?
What is emissions trading?
How does the EU Emissions Trading Scheme work?
Renewables
What is Renewable Electricity?
How much electricity is generated from renewable sources?
What incentives are there to build a renewable energy project?
What is the Renewables Obligation?
What is microgeneration?
More information
Electricity use
Why do we need electricity?
Electricity is needed to light and heat homes and to power domestic appliances.
Electricity is used by companies to enable them to produce the goods and
services demanded by consumers. Nearly every product sold in the UK has involved
the use electricity at some stage during its production or sale.
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Who uses electricity?
Everyone uses electricity. The table below shows how electricity use is split
between different groups of users. Industry and domestic users are the largest
single groups of users in the UK, each consuming about 34% of the total
electricity used.
|
Sector
|
Electricity Use, GWh (2004)
|
Percentage
|
|
Industry
|
117,149
|
34.45%
|
|
Transport
|
8,034
|
2.36%
|
|
Domestic
|
115,526
|
33.97%
|
|
Public administration
|
20,924
|
6.15%
|
|
Commercial
|
74,215
|
21.83%
|
|
Agriculture
|
4,194
|
1.23%
|
|
Total
|
340,043
|
100%
|
Source:
Digest
of UK Energy Statistics 2005
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How much
electricity does the average person use?
The average person in the UK uses 1,930 'units' or kilowatt
hours (kWh) of electricity per year. The average household uses 4,478 units of
electricity. Total domestic electricity demand is 115,526,000,000 units, or
115,526 gigawatt hours (GWh), approximately 30% of the UK's total
demand. The total domestic and industrial electricity demand in the UK is 340,043 GWh.
One gigawatt hour is one million kilowatt hours.
Source:
Digest
of UK Energy Statistics 2005, Office
for National Statistics
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Electricity
generation
How is
electricity generated?
Electricity
generation from fossil fuels, nuclear or renewable fuels, or other sources is
mostly based on the fact that when magnets are moved near a wire, an electric
current is generated in that wire. This phenomenon is called electromagnetic
induction and generates an alternating current. (There are some other ways to
generate electricity that are described briefly below). Usually large scale
electricity is generated by a shaft with many windings of copper wire spinning
around inside very large magnets at very high speeds. The difference between
different fuel types and technologies is how they make the shaft spin. Nuclear
power, coal, oil and some gas technologies produce steam that drives a steam
turbine that is connected to the shaft that spins. Other gas-fired technologies
use the hot gaseous products of combustion to drive a gas turbine directly that
spins the shaft without the need to produce steam. In a hydro-electric scheme
the flow of the water causes the shaft to spin. In a wind generator flow of the
wind causes the shaft to spin. Regardless of which fuel or technology is used
to make the shaft spin, the electricity produced is the same.
The
kind of batteries you use in your mobile phone or mp3 player produce
electricity because of a chemical reaction that occurs inside the battery case.
That is why the battery eventually runs out, as the all chemicals have reacted.
When you recharge rechargeable batteries electricity is used to drive the
chemical reaction backwards to recreate the original chemicals. This process is
not one hundred percent efficient so eventually the performance of rechargeable
batteries declines.
Photovoltaic
cells are increasingly being put on roofs. They absorb light, which then causes
an electric current to flow between a sandwich of materials with differing
electrical properties.
There
are other phenomena that cause electric current to flow. At the moment these
are small scale and you are unlikely to see them in your everyday life.
However, who knows what the future may hold?
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Which
fuels are used to generate electricity in the UK?
Gas, coal and nuclear are the main sources of fuel used in power stations
across the UK. This chart shows the breakdown of the fuels used to
generate electricity.
Source:
Digest
of UK Energy Statistics 2005
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What is
the thermal efficiency of thermal generating technologies?
Coal stations had an average thermal efficiency of 36.2% in 2004. The average
thermal efficiency for combined cycle gas stations was 46.8% and the thermal
efficiency of nuclear stations was 37.9%. Thermal efficiency is the efficiency
with which the energy content (measured in gross calorific value) of the input
fuel is turned into electrical energy by the generating station.
Source:
Digest
of UK Energy Statistics 2005
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Will
different fuels be used to generate electricity in future?
The UK uses a diverse range of fuels and technologies to
generate its electricity. This diversity has helped ensure secure supplies of
electricity. In future the composition of the UK's generating capacity is
likely to change in response to government policy and commercial opportunity,
although the government has clearly stated in its 2003 Energy White Paper
that it does not propose to set targets for the share of total energy or
electricity supply to be met from different fuels. It prefers to create a
market framework, reinforced by long-term policy measures, which will give
investors, business and consumers the right incentives to find the balance that
will most effectively meet our overall goals.
Source:
DTI, Energy
White Paper
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What is
CHP?
Combined Heat and Power (CHP) is the simultaneous generation of usable
heat and power (usually electricity) in a single process. This is sometimes
referred to as 'cogeneration'. CHP units recover the steam and hot water
produced in generating electricity for further use in industrial processes or
community and space heating. CHP uses a variety of fuels and technologies,
although the majority of CHP plants is fuelled by natural gas.
CHP plants can be highly energy efficient because generating heat and
power together provides energy savings compared with generating them
separately. Also, CHP units are usually sized to make full use of the heat
generated and tend to be connected to the lower voltage distribution network,
avoiding the energy losses incurred in the transmission grid.
Micro-CHP units are now available for use in the home in place of a
standard boiler. More information on domestic electricity generation can be
found here.
Source: Digest of
UK Energy Statistics 2005
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How much
electricity is generated in the UK?
A total of 392,979 GWh of electricity was produced in the UK in 2004.
The
table below shows how electricity production in the UK has changed
in recent years.
|
Year
|
Electricity produced (GWh)
|
|
2004
|
392,979
|
|
2003
|
395,886
|
|
2002
|
384,854
|
|
2001
|
382,355
|
|
2000
|
372,206
|
|
1999
|
365,462
|
|
1998
|
361,096
|
Source:
Digest
of UK Energy Statistics 2001, 2004 & 2005
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Can the UK import electricity from abroad?
The UK is currently capable of meeting its own electricity generation requirements, but
does participate in electricity trading with the rest of Europe. In 2004
the UK imported 9,784 GWh of electricity and exported 2,294 GWh.
The integration of national electricity markets is one of the European
Union's key energy policy goals.
Currently
electricity is transported to and from France through a 2
GW high voltage direct current link under the English Channel. This makes
landfall at Baker's Gap, near Folkstone. The England-France electricity interconnector
plays a significant role in the electricity market. Power flows through the interconnector
react to electricity prices. Electricity is therefore imported from France when it is
cheaper than that generated in the UK and vice versa. There
is also a 500 MW connection between Scotland and Northern
Ireland and a 600 MW connection between Northern Ireland and the Republic of Ireland. A subsea
connection between Wales and the Republic of Ireland is also
being considered. Further interconnectors are being planned, one linking the UK to Norway and another
to the Netherlands.
Source:
Digest
of UK Energy Statistics 2005, National Grid,
SONI
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Electricity
industry
How is the
electricity industry structured?
The electricity industry has four key parts; generation, supply, transmission
and distribution. Generation is the production of electricity in generating
stations. Supply is the sale of electricity to the final consumer. Transmission
is the bulk transportation of the electricity, from power stations, along a
high voltage system ('the grid') and the distribution network is a lower
voltage system for the local delivery of electricity to the point of demand.
Some companies operate in more than one sector of the industry, for example
generation and supply. A few generate electricity, own and operate local
distribution networks and supply final consumers. Generation and supply takes
place in a competitive market. Transmission and distribution are regulated
monopolies.
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How is
electricity traded?
Electricity generators sell the majority of their output (over 90%) to
electricity suppliers in bilateral contracts. Additionally generators and suppliers
may use power exchanges (trading arenas in which electricity is bought and
sold) to trade electricity; currently this accounts for approximately 7% of
traded electricity. Suppliers then sell the electricity in the retail market to
customers. Traders also buy and sell electricity between generators and
suppliers. Parties trading electricity negotiate a price for the electricity in
half hourly blocks.
The
remainder (2-3%) is traded via a system called the Balancing Mechanism. The Balancing and
Settlement Code, administered by ELEXON,
sets out the obligations on generators and suppliers and other parties so that
the reconciliation of their actual physical outcome (metered generation and
consumption) with their contractually agreed trades can take place. Because
domestic electricity meters are only read infrequently, the final allocation of
energy consumed between the suppliers takes place 14 months after the event.
Before then the settlement process takes place in ever increasing circles of
accuracy, as more and more metered data becomes available.
Participants
notify the system operator (National Grid) of how much electricity they plan to
generate and demand each half hour no later than one hour before the start of
each half hour block of electricity is created or used. In the hour before the
electricity is generated or demanded National Grid prepares to balance the
predicted level of output and demand for the half hour block. Using the
Balancing Mechanism, National Grid is able to buy additional electricity from
generators offering additional output or to sell back to generators excess
output which is not needed to meet the predicted demand for that half hour.
Further
explanation of the way in which electricity is traded can be found here.
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What is
ELEXON?
ELEXON is the company which manages the balancing and settlement
arrangements contained in the Balancing and Settlement Code. All licensed
electricity companies are obliged to sign the Code, which sets out the rules
and governance arrangements for the electricity trading which takes place to
balance the system. ELEXON's website can be found here.
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Who are
National Grid?
National Grid
owns and maintains the high voltage electricity transmission system in England
and Wales and operates this
transmission system throughout Great Britain,
balancing supply and demand on a second by second basis.
The transmission system in Scotland
is owned by Scottish
Power Transmission (central and southern Scotland)
and Scottish
Hydro-Electric Transmission Ltd (northern Scotland).
The low voltage distribution network is operated by several
Distribution Network Operators (DNOs). Details of DNOs and the structure of
electricity networks in general can be found on the website of the Energy
Networks Association.
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Who
regulates the electricity industry?
Ofgem is the regulator for Britain's gas and
electricity industries. Its role is to protect and advance the interests of
consumers by promoting competition where possible, and through regulation only
where necessary. Ofgem's work focuses on the following areas:
-
making gas and electricity markets work effectively;
- regulating monopoly businesses;
- securing Britain's gas and electricity supplies; and
- meeting its social and environmental responsibilities.
Ofgem
operates under the direction and governance of the Gas and Electricity Markets
Authority, which makes all major decisions and sets policy priorities for Ofgem.
The Authority's role in the management of Ofgem is set out in its rules
of procedure.
Ofgem's powers are provided for under the Gas Act 1986 and the Electricity
Act 1989, as amended by the Utilities Act 2000
and the Energy
Act 2004. It also has enforcement powers under the Competition Act
1998.
More
information on Ofgem can be found on Ofgem's website.
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Which
trade associations represent electricity generators?
The Association of Electricity Producers is the leading trade
association for the UK's
electricity generation sector. The Association has some 100 members, ranging
from small firms to large, well-known PLCs. Between them they embrace nearly
every generating technology used in the UK.
An overview of the Association's work can be found here.
The Association of Electricity Producers is a member of Eurelectric,
the professional association which represents the common interests of the
electricity industry at a pan-European level.
Further trade associations exist in the UK to represent more specialised generation interests, such as renewable energy.
These organisations can be found in the Links section of this website.
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Who
operates my local electricity network?
For a map showing the owners and operators of the local distribution networks
see the Energy Networks Association
website. You can find and contact your local distribution network operator
through the site. In the event of a loss of electricity supply it is the
distribution network operator who is responsible for restoring supplies, not
your electricity supplier.
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How do I
change my electricity supplier?
All consumers can change their electricity supplier. There are a number of
internet price comparison services available. Energywatch, the
independent watchdog for gas and electricity consumers, provides a list
of those that have signed up to its code of practice. On these websites you can
calculate the possible savings to be made from switching supplier and apply to
transfer to another supplier. A list of electricity suppliers can be found on
the website electricityinfo.org. This
service allows you to compare the fuel mix that is used to generate the
electricity that each supplier provides.
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Power
stations
Who owns
the power stations in the UK?
Power
stations in the UK are owned by a number of different companies.
A list of the companies which own power stations in the UK can be
found in the Government's annual Digest of UK Energy Statistics. The list details the
stations owned by each company, the stations' capacities, fuel sources and the
dates they were commissioned.
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How many
power stations are there in the UK?
There are over 2,000 generating stations in the UK. The majority of
the generating capacity is fuelled by coal, gas and nuclear energy. There is a
large number of generating stations using renewable fuels such as hydro, wind,
landfill gas, wastes and biomass and combined heat and power stations. These
stations tend to be much smaller than conventional thermal plants so, whilst
their total number is greater than that of conventional thermal stations, their
combined capacity is much smaller.
The table below shows the technologies and fuels used in power stations and details numbers for conventional stations over 1 MW in capacity and renewables
accredited under the Renewables Obligation.
|
Fuel
|
Number of stations (2004)
|
|
Coal
|
14
|
|
Gas (including CCGT)
|
46
|
|
Nuclear
|
12
|
|
Coal and oil, oil, kerosene, diesel, gas oil
|
35
|
|
Hydro
|
73
|
|
CHP
|
1,552
|
|
Renewable
|
883
|
|
Total
|
2,615
|
Source:
Digest
of UK Energy Statistics 2005, Ofgem
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Is there a
list of power stations in the UK?
The
Government produces a list of major power stations in the UK. It can be
accessed here. The list includes all the major power stations
but not smaller stations such as wind farms, small CHP or photovoltaic units. A
list of large scale CHP plants can be accessed here.
Ofgem produces a list of renewable power stations which are eligible for the Renewables
Obligation and Climate Change Levy exemption. It can be accessed here.
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What is
the average load factor in the UK?
The average load factor of generation plants in the UK was 66.3%
in 2004. This means that, on average, the output from power stations during
2004 was 66.3% of the total maximum possible from every plant.
Source: Digest
of UK Energy Statistics 2005
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What is
the plant margin in the UK?
A recent update to the National Grid's Seven
Year Statement calculates the UK
plant margin for 2005/2006 to be 20.7%.
The plant margin is the amount by which the installed generation
capacity exceeds the forecast peak demand and is expressed as a percentage. An
appropriate minimum plant margin is required to ensure security of supply even
when some generating plant is out of service or in case of unexpected
variations in customer demand.
Source: National
Grid
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How do I build my own power plant?
Most
small plants are connected to the distribution network, which operates at a
lower voltage than the transmission grid. This is known as 'distributed' or 'embedded' generation. The DTI has produced a guide for those wishing to
connect to the network in this way and trade their electricity. It is available
here.
Most
power stations require planning permission from local authorities and may
require other permits such as environmental permits. If the power station is
over 10 MW and designed to run on oil or natural gas, it must also receive
consent from the Secretary of State for Trade and Industry under section 14 of
the Energy Act 1976.
Contracts
will have to be arranged for any electricity that you sell and a connection
negotiated. This guide gives an
indication of the tradable value of distributed generation. Detailed
information on opportunities for selling power is available here.
A technical
guide to obtaining a connection is also available.
Source:
DTI
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What
is a section 36 consent?
Power
stations of over 50 MW (or 1 MW if in territorial waters) in England and Wales are subject
to the consent of the Secretary of State for Trade and Industry under section
36 of the Electricity
Act 1989. The criteria on which the Secretary of State grants section
36 consents are the acceptability of the proposed scheme in terms of energy
policy and planning and environmental concerns. In granting consent, the
Secretary of State will also usually give planning permission, subject to a
number of conditions to mitigate the impact of the development. Applications in
Scotland are handled
by the Scottish Executive, while offshore applications in Wales are
considered by the National Assembly.
This webpage lists recent
decisions on section 36 applications and those currently under consideration in
England and Wales.
Applications in Scotland can be viewed here.
Source:
DTI
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Emissions
How much
carbon dioxide is emitted from electricity generation?
In 2004 power stations in the UK emitted 47 million tonnes of carbon (MtC).
It is estimated that this accounted for 30% of the UK's total
carbon dioxide emissions in that year. The average amount of carbon dioxide
emitted per unit of electricity generated has halved since 1970. This is due to
the decreasing use of coal and increased use of gas in power stations,
increased efficiency of fossil fuelled stations and an increased use of nuclear
and renewable fuels.
Carbon
dioxide emissions vary depending on the type of fuel used to generate
electricity. The table below gives an indication of the quantity of carbon
emitted by different fuels for every gigawatt hour of electricity supplied. A
total of 403,118 GWh of electricity was supplied in the UK in 2004.
|
Fuel
|
Emissions (tonnes of carbon/GWh electricity supplied)
|
|
Coal
|
242.9
|
|
Oil
|
166.0
|
|
Gas
|
101.6
|
|
All fossil fuels
|
165.6
|
|
All fuels (including nuclear and renewables)
|
124.1
|
The
transport sector is the main other source of carbon dioxide emissions in the UK. Emissions
from the transport sector are expected to rise in future, whilst emissions from
the electricity generation sector are projected to fall.
Other
industries which emit a large amount of carbon dioxide include the refineries
sector, offshore oil and gas sector, and the iron and steel sector.
Source:
UK
Energy Sector Indicators 2005, Digest
of UK Energy Statistics 2005
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Where can
I find out about emissions from individual power stations?
The
Environment Agency maintains a database of information on the release of
pollutants from the sites that it regulates in England and Wales. This
includes many power stations. The database reports annual emissions
figures for each site and can be accessed here.
It can be searched by place name, operator or location. Most power stations
covered by the database are categorised as combustion plants. Nuclear power
stations are included under the category of Radioactive Substances.
The
Scottish Environment Protection Agency maintains a similar database for sites
in Scotland. This can
be searched by postcode, operator or pollutant and is available here.
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What is
emissions trading?
Emissions trading has been developed as a key instrument in the drive to reduce
greenhouse gas emissions. The rationale behind emissions trading is to ensure
that the emissions reductions required to achieve a pre-determined
environmental outcome take place where the cost of the reduction is the lowest.
An overall cap on emissions from all participating installations is set and the
allowances are divided between the participating installations. Each allowance
allows a regulated installation to emit a unit of the relevant emissions.
Participants
in a trading scheme will be given in advance a fixed allocation of allowances
for a given compliance period. Their actual emissions will depend on a number of
factors and are therefore likely to be either more or less than their allocated
allowances in any given compliance period. They therefore need to consider how
best to manage their emissions and allowances throughout the year in
preparation for surrendering allowances equal to their actual emissions for
each compliance period.
The
most cost-effective strategy for each installation will vary. Participants with
relatively high abatement costs can be expected to have higher emissions and
achieve compliance by, at least in part, buying allowances from other
participants. Participants with relatively low abatement costs will undertake
more abatement activity and can be expected to benefit from the sale of any
surplus allowances. In contrast to regulation of each installation, which
imposes emissions limit values on particular installations, emissions trading
gives companies the flexibility to meet emissions reduction targets according
to their own strategy; for example by reducing emissions on site or by buying
allowances from the market. The environmental outcome is not affected because
the overall amount of allowances allocated is fixed.
Emissions
trading is particularly suited to the emissions of greenhouse gases, the gases
responsible for global warming, because they have the same effect wherever they
are emitted. This allows the relevant authority to regulate in aggregate the
amount of emissions produced by setting the overall cap for the scheme but
gives companies the flexibility of determining how and where the emissions
reductions will be achieved. By allowing participants the flexibility to trade
allowances, the overall emissions reductions are achieved in the most
cost-effective way possible.
Source:
DEFRA,
Consultation on UK draft National Allocation Plan for 2005 to 2007
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How does
the EU Emissions Trading Scheme work?
In October 2001 the European Commission proposed the establishment of an EU
Emissions Trading Scheme (ETS) as one of the policies being introduced across Europe to tackle
emissions of carbon dioxide and other greenhouse gases and combat the serious
threat of climate change. On 23 October 2003, the arrangements for the EUETS
came into force under the Directive 2003/87/EC.
The
Scheme commenced on 1 January 2005. The first phase runs from 2005-2007
and the second phase will run from 2008-2012 to coincide with the first Kyoto
Protocol commitment period. Arrangements beyond 2012 are uncertain.
The
first phase covers installations that carry out any of the activities listed in
Annex 1 of the Directive. Energy activities including combustion installations
with a rated thermal input of more than 20MW are included in the Annex. This
means that a large number of electricity generating stations are covered by the
Emissions Trading Scheme. For the first phase of the scheme, only emissions of
carbon dioxide are covered. However, there is scope within the Directive for
the scheme to be expanded in the future to other activities and gases.
The
EUETS works on a 'cap and trade' basis. The
overall cap or total number of allowances is EU wide because allowances are
freely tradable across the EU. The total size of the market is therefore the
aggregate of the total quantities of allowances issued by the 25 Member States
of the EU. Each allowance represents one tonne of emissions.
Member
States have drawn up plans setting out the total quantity of allowances to be
allocated to all installations covered by the Scheme and how these allowances
will be distributed to each installation. The intended approach of each Member State is set out
in a document called the National Allocation Plan (NAP). The Scheme covers
over 1,000 installations in the UK and more than 12,000 across the EU. The
UK currently
has an allocation of 736 million allowances, although it may receive an extra
19.8 million allowances. The price of allowances increased dramatically in the
first six months of the scheme and peaked at nearly €30/tonne in July 2005.
Between October and December 2005 allowances tended to trade at between €21 and
€24/tonne.
A
linking directive has been agreed by the European Parliament which will allow Joint Implementation (JI) and Clean Development Mechanism (CDM) credits to be used in the first phase of the
EUETS.
A
full explanation of the workings of the EUETS, including national allocations
for all the Member States, can be found in this European
Commission brochure. Further information is available on the websites
of the European
Commission and Defra.
Source:
DEFRA,
European
Commission Environment DG
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Renewables
What is
Renewable Electricity?
Renewable electricity is electricity which is produced using energy flows in
the natural environment, eg. wind, solar, wave and hydro. Renewable electricity
can also be obtained from biomass sources, eg. plants, waste wood, landfill gas
and sewage gas.
In
contrast to fossil fuels, of which there is only a limited supply in the world,
renewable sources will not run out from continued use (although sources of
biomass have to be replenished).
Click here
for a list of renewable sources which are eligible for the government's Renewables Obligation.
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How much electricity is generated from renewable sources?
A total of 14,171 GWh of electricity was generated from renewable
sources in the UK in 2004. This was 3.6% of all electricity generated in that year. Renewable
electricity was generated by different technologies in the following mix:
Source: Digest
of UK Energy Statistics 2005
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What incentives are there to build a renewable energy project?
In addition to the value of the electricity generated by renewables
projects, there are several government incentives to encourage investment in
renewable energy. The most important of these is the Renewables Obligation
(RO). Renewables Obligation Certificates (ROCs) are issued for each megawatt
hour of electricity generated from an accredited renewable source. Generators
can then sell the ROCs to suppliers, who are obliged to supply an annually
increasing percentage of electricity from renewable sources. Recent auction
values for the certificates can be found on the Non-Fossil Purchasing Agency
website.
The tradable value of ROCs is high because they are in demand
from suppliers as less electricity is generated from renewable sources than
they are obliged to supply. Suppliers who cannot present a sufficient number of
ROCs to meet their obligation have to pay a 'buy-out price' of roughly £30 per megawatt hour. Money collected from payment of the buy-out price is
redistributed to those suppliers that did present certificates in proportion to
the number of certificates they presented. Consequently the nominal value of a
ROC is the buy-out price plus the amount per ROC that suppliers receive from
the redistribution of the buy-out fund.
Another incentive is that electricity generated from renewable
sources qualifies for Levy Exemption Certificates (LECs) for exemption from the
Climate Change Levy (CCL). The CCL is a tax on energy use by commercial
customers. The exemption that electricity from renewable sources has from the
levy allows generators to charge a premium price for their electricity as
suppliers can make a profit on exempt electricity either by charging a price
that includes the levy or by lowering the price and hence being more
competitive.
The government also provides grants for some new renewables
projects, investing in offshore wind and biomass. Details of the DTI's Capital
Grants Scheme can be found here. For
domestic-scale renewables projects (known as 'microgeneration'), the Clear Skies Programme can provide
funding.
An explanation of the schemes and certificates that add value to
electricity from renewable sources can be found here. The DTI
has produced a brochure for those
thinking of investing in renewables.
Source: DTI,
DEFRA
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What is the Renewables Obligation?
The Renewables
Obligation Order is the government's mechanism for increasing the
proportion of electricity produced from renewable sources. The obligation is on
suppliers to source a specific percentage of the electricity they supply to
retail customers from renewable sources. In 2005/06 this is 5.5% and will rise
year on year until it is 15.4% in 2015/16. The Order was introduced in 2002 and
superseded the Non-Fossil Fuel Obligations (NFFO), although many of the
contracts struck under the NFFO are still in force. The Obligation acts as an
incentive for investment in renewable energy sources because it increases the
profits generators make from their electricity.
For each megawatt hour of electricity generated from an
accredited renewable source, a tradable certificate called a Renewables
Obligation Certificate (ROC) is issued to the generator. These can then be sold
to suppliers either with or separately from the electricity. Suppliers must be in
possession of the number of ROCs matching the percentage of electricity they
are obliged to supply from renewable sources in that year. Alternatively they
can choose to pay a fixed sum for each megawatt hour of electricity that falls
under the obligation but for which they do not hold a ROC. This buy-out price
is set by Ofgem and adjusted annually to reflect changes in the Retail Prices
Index. In 2005/06 the buy-out price is £32.33/MWh.
As the quantity of electricity actually produced from renewable
sources is currently less than the percentage the suppliers are obliged to
supply, the tradable value of ROCs is high. ROCs have regularly traded for over £40. This is because for every ROC a supplier presents he is given a
corresponding proportion of the money raised from the buy-out payments. In
2004/05 this was £13.66 per ROC in England and Wales and £19.99
per ROC in Scotland. This system allows the supplier to make
competitive decisions on how he will meet the terms of the Obligation.
A summary of the Renewables Obligation 2004/05 is available here.
Source: DTI,
Ofgem
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What is microgeneration?
The Energy
Act 2004 defines microgeneration as generating electricity from any
plant with a capacity of less than 50 kW which uses a technology that reduces
emissions of greenhouse gases. The quantity of electricity produced from each microgeneration
unit is so small that it tends to be used close to where it is generated. This
means that much of the energy loss incurred in transmission and distribution
networks is avoided.
Further information on microgeneration technologies can be found
on the website of the Micropower
Council.
Source: Energy Act 2004
(c.20)
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More information
More
information on the electricity and other energy industries in the UK can be
found in the Digest of UK Energy Statistics 2005 (DUKES). DUKES includes
information on energy sources, supply and consumption and data for the UK's power
stations. It is published every year by the DTI and contains data for the
previous year. It can be viewed and downloaded from the DTI website, http://www.dti.gov.uk/energy/inform/dukes/index.shtml
Further
energy statistics, including monthly and quarterly updates of electricity
production and consumption and other trends and projections, are available at http://www.dti.gov.uk/energy/inform/index.shtml
European
energy figures and projections can be found on the websites of the European
Commission, http://europa.eu.int/comm/dgs/energy_transport/figures/
index_en.htm,
and EURELECTRIC, http://public.eurelectric.org/Content/Default.asp?PageID=460
DEFRA's
environmental statistics include information on greenhouse gas emissions and
air quality and are online at http://www.defra.gov.uk/environment/statistics/index.htm
The
Environment Agency also provides environmental facts and figures online,
including information on pollution and the businesses that the Agency
regulates, at http://www.environment-agency.gov.uk/yourenv/eff/
Additional
information can be found on other related websites listed in the Links section of this website.
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