Uncharted Territory

December 4, 2011

Fixing FITs some more

Filed under: Electricity, Energy, Energy policy, Feed-in tariffs, Global warming, Solar PV — Tim Joslin @ 1:40 pm

I noted yesterday that the UK’s expensive feed-in tariff (FIT) is not structured to support the development of the highly efficient technologies (turning 30%+ of the energy in incident sunlight to useful electricity) that the country will need in the future.

Here’s a more concrete example of what is happening. If we look at the web-site of one reputable supplier, Spirit Solar, we see that they offer several types of panel. The stand-outs are Sanyo’s “Hybrid Mono” products, with the HIT-N240SE10 achieving 19% efficiency. These are still just silicon based (I understand that best results will eventually be obtained with layered panels, each layer using a different technology to capture light of particular wavelengths), but optimised for efficiency. The Sanyos are just a tad more expensive than the bog-standard panels at 14-15% efficiency. But here’s what Spirit Solar say:

“The Sanyo are the most expensive per Watt of power generated. Their one big advantage is that by using a different ‘hybrid’ technology they give approximately 25% more power per square metre than any other panel. …the Sanyo gives 190 Watts per square metre, compared to between 134 [actually none are this low – the figure is presumably out of date and the text should read “141”] and 149 Watts per square metre for the other panels. The downside is that they currently cost around 50p more per Watt – so for a 2 kWp system you will pay around £1000 more if you choose Sanyo. So if you are wondering whether to buy Sanyo or not, ask yourself what are you trying to maximise – the total power you can squeeze out of your roof or your financial return? If your objective is simply to maximise the power output from your available roof space without regard to budget, then you should choose the Sanyo hybrids. Don’t choose the hybrids if you want to maximise your financial return.” [my stress]

You have to email for a quote, and PV prices are currently all over the place, but that extra £1000 is on a system costing at least £5000, probably somewhat more. That is, for 20% more, tops, you get 25% more power for a given area. No-brainer.

But, as discussed yesterday, the FIT scheme does not provide an incentive to maximise output per unit area.

In fact, the FIT scheme seems to have been devised with no thought as to the behaviour it will encourage. The sole goal seems to have been to “bung up a few solar PV panels”.

Another page on Spirit Solar’s rather informative site illustrates another problem. Scroll through some of the pictures of the company’s installations. There are a number of examples of roofs where far more area could have been covered with panels.

Why wouldn’t customers want to cover their whole roof? Because there’s no incentive to do so, of course. Many installations will be of 4kW capacity (4kWp, where p stands for “peak”) or slightly under. Why? Because larger schemes receive a lower tariff. In fact, as I understand it, and using the tariffs to be put in place from now on, there’s no point at all in putting up a scheme of 4-4.8kWp. That’s right – you get less for a 4.8kWp system than for one of 4kWp. (The generating tariff for a scheme up to 4kWp is 21p/kWh, whereas for 4-10kWp it’s only 16.8p/kWh, so schemes of 4-4.88kWp will earn less revenue than those of 4kWp or just less!).

Of course, this problem could be simply fixed by qualifying the first 4kWp for the higher tariff and only additional capacity for the lower rate. This would at least mean that solar PV generators have an incentive to cover the whole available roof area.

Another solution would be simply to have more bands. The worst thing about the whole scheme is that you need a large unshaded roof area to reach the optimal 4kWp (about 25m^2 for standard panels, 20m^2 for the Sanyos), so there should be bands for smaller roofs (say 1kWp and 2kWp, but this should be done on installation area as discussed yesterday) and to ensure larger roofs were fully utilized (say 6kWp, 8kWp as well as 10kWp, and more subdivisions up to 50kWp).

There is another problem, though, which is that the export tariff is only 3p/kWh. That is, if you use the electricity, you displace electricity (or gas) you would otherwise have had to buy for around 10p/kWh (or 5p/kWh for gas). Since most households would be hard pushed to make use of more than 4kW for any length of time (though I don’t see why solar PV generators don’t invest in a 20kW battery to store energy for the hours of darkness), this means the drop-off in revenue above 4kWp is even worse.

Surely the policy is eventually to generate electricity for sale to the grid. If this is the case, then shouldn’t the export tariff be somewhat higher? I gather the 3p/kWh is based on the wholesale price for electricity. But solar PV electricity is more useful than bog-standard electricity. It’s renewable for a start, so should qualify for ROCs (renewable obligation certificates) which otherwise cost money. And it’s at a peak time (except perhaps at weekends). One problem is that you don’t want the export tariff to exceed the retail gas price, because then solar PV generators have an incentive to use gas rather than electricity (since they can sell the electricity to pay for the gas and still be quids in), but there’s still scope for an increase to, say, 4.5p/kWh. This would make it a little more worthwhile for people to cover their whole roof with panels.

It may be worth DECC thinking through the FIT scheme a little more thoroughly, since these panels are going to last for decades – they’re typically guaranteed to provide at least 80% of their original output in 25 years. Once they’re up, it’s not going to be worth taking panels down – especially those qualifying for FITs – to replace them with more efficient technology.

Why don’t we try to get something right first time for once?

December 3, 2011

Fixing FITs

Filed under: Electricity, Energy, Energy policy, Feed-in tariffs, Global warming, Solar PV — Tim Joslin @ 6:46 pm

Regular readers will be well aware of my long-standing scepticism as to the value of a policy of generous Feed-in Tariffs (FITs) to support small-scale solar PV installations. I see that my blog category on the topic of FITs now has no fewer than 10 posts (11 with this one), dating back to February 2008 – and that first entry included a letter sent to the Guardian in December 2007. So I’ve been documenting this fiasco for 4 years – so far.

DECC have launched yet another review of FITs. It seems like just yesterday I responded to their fast-track review. Don’t try and read this in DECC’s amazing non-scrolling spreadsheet (downloadable from their FIT fast-track consultation page) but I see I ended my answer to their question 2 (which mostly consisted of expressions of astonishment that they had no effective mechanism for controlling the cost of FITs) by saying:

“If the intention is to exclude investors altogether and encourage only those pursuing a low-carbon lifestyle or self-sufficiency, then the domestic PV tariff should be reduced by at least 50% immediately.”

which is only what they’ve gone and done!

Subsequent to sending off my response to the fast-track consultation back in May, I realised that the most efficient way of setting FIT rates would be by auction (it seems some people made this point in their responses back then). The latest consultation is another opportunity for me to make this point.

But there are even bigger (fitter?) fish to fry. Just in time (normally abbreviated to JIT, so maybe I can say “JIT for FIT policy…”!), the Royal Society held a two-day discussion meeting on solar power in mid-November. As you’d expect there was a lot of discussion of new whizzy technologies. But a couple of more prosaic points struck me:

  1. Solar power generation in the UK is limited by the available space, David MacKay emphasising this point in particular.
  2. New solar PV technologies – that might convert a greater proportion of sunlight into electricity – are finding it difficult to get to market. As costs are lowered for these technologies, “traditional” silicon-wafer based PV continues to build scale economies.

In other words, FIT policies and other government subsidies around the world are driving prices down for the wrong technology for Britain. We don’t want 10% efficient panels, we want to turn 30-40% of the energy in sunlight into electricity.

Now, if you have a roof of a limited size, then, once there are no subsidies and the cost of solar PV is competitive with other forms of energy, you’ll choose the most efficient technology that continues to yield cost savings compared to buying electricity. That is, you’ll consider panels of 10% efficiency, 15%, 20% and so on until the cost per additional kWh over the lifetime of the panel exceeds the value of the electricity generated.

But subsidies screw things up.

As usual.

Specifically, in the UK FIT scheme, you’re limited by the banding to a certain size of installation. For example, the tariff for an installation of up to 4kW capacity is 21p/kWh. For 4-10kW it’s only 16.8p/kWh. So installations are typically of just under 4kW capacity. If your roof can accomodate a cheap 4kW panel there’s no incentive to instal a more efficient panel. Or even to use the whole roof. The UK’s solar resource is being squandered.

There are many ways to address the problem. You could devise all kinds of rules and regulations to ensure people used more efficient panels to drive down the costs of the best technologies.

One simple approach, though, might be to base the banding on installation area, not capacity. That is, the highest tariffs would be for installations that used just a few square metres. This would provide an incentive to squeeze as much energy out of the space as possible. It would also be more equitable as it would favour the owners of large roofs much less than does the present system. Most important, though, such a scheme would provide a market to help bring down the cost of the technologies we need for the future.

The present system ensures that all the available FIT income will go to owners of large roofs. Because more efficient panels cost more per Watt, the Government will keep lowering the tariff in response to a surge of installations of less efficient panels as their price comes down because of scale economies.  The FIT will never be high enough to justify installations of more expensive, more efficient panels on smaller roofs.

Tariffs for installations starting at (say) just 5m^2 roof space (compared to around 25m^2 for typical panels in a 4kW installation today) would ensure there is a market for the more efficient panels.

The approach of FIT banding by installation area rather than capacity could be simply combined with auctions – that is, prospective PV generators would bid the lowest FIT they were prepared to accept for one of a quota of solar PV installations of a given area – up to 5m^2, up to 10m^2 and so on.

May 27, 2011

The UK’s RTFO – Electricity Should Count

Filed under: Biofuels, Electricity, Energy, Global warming, Rail, Road, RTFO, Transport — Tim Joslin @ 4:14 pm

The UK’s RTFO (Renewable Transport Fuel Obligation) is the policy dating back to 2007 that enacts an EU Directive requiring member states to ensure that an increasing proportion of transport fuel is renewable. This meant biofuels. I’ve written previously at length about this folly, most recently here. RTFO, folly, policy, maybe we should talk about the “follicy”, the “RTFOlly” or even the “RTFOllicy”!

Anyway, the EU seems to have listened to at least some of the many organisations objecting to their biofuel policy. They’ve come up with not one, but two new Directives which affect national policies on the issue:

  • The Renewable Energy Directive (“the RED”), 2009/28/EC (pdf), is broader in scope than transport. It details the requirements on EU member states to meet the 2020 goal of 20% renewable energy in the EU as a whole. Whilst this is broken down into different targets for different countries (for example the UK has to get to 15%), the Directive reaffirms a uniform 10% renewable target for transport fuels. It includes a lot more detail on how this can be done, though, including sustainability requirements of various kinds.
  • A new Fuel Quality Directive (“the FQD”), 2009/30/EC (pdf) which amends an earlier FQD by introducing an Article 7 (actually I now see there’s a bit more complexity than that – you can’t take anything on trust, can you?), which introduces two extra requirements:
    • to reduce greenhouse gas emissions in transport fuel by 6% by 2020;
    • for transport biofuels to meet certain sustainability criteria.  Apparently these are to all intents and purposes the same as those included in the RED, so perhaps the FQD is a Directive too far and the RED should have just covered everything.

Accordingly the UK’s Department for Transport (DfT) has initiated not one, but two reviews (hey, we can create a legislative mess just as well as they can in Brussels!), with consultations on both open until next Thursday (2nd June):

  • The RED Public Consultation, which considers amendments to the RTFO, to meet the new Directive including biofuel sustainability criteria.
  • The FQD Public Consultation, which only covers the requirement to reduce by 6% by 2020 the greenhouse gas (GHG) intensity of transport fuel or energy.

One of the problems with biofuel policy in the EU – apart the very existence of quotas and subsidies in the first place – is that it has become hideously complex.  There are no doubt many little devils in the detail.  But all I’m going to cover in this post is one aspect of the RED.

It seems that the EU has actually done something sensible.  They’ve introduced a clause to ensure that the 10% renewable energy in transport target is technologically neutral.  That is, they’ve back-tracked on trying to second-guess what kind of non fossil-fuel powered cars many of us will be driving by 2030 or so.  Yeap, they’ve only gone and allowed renewable electricity (and hydrogen for that matter) to count towards the 10% target.

Here’s what they say in paragraph 4 of article 3 of the RED:

“4. Each Member State shall ensure that the share of energy from renewable sources in all forms of transport in 2020 is at least 10% of the final consumption of energy in transport in that Member State. For the purposes of this paragraph, the following provisions shall apply:

(a) for the calculation of the denominator, that is the total amount of energy consumed in transport for the purposes of the first subparagraph, only petrol, diesel, biofuels consumed in road and rail transport, and electricity shall be taken into account;

(b) for the calculation of the numerator, that is the amount of energy from renewable sources consumed in transport for the purposes of the first subparagraph, all types of energy from renewable sources consumed in all forms of transport shall be taken into account;

(c) for the calculation of the contribution from electricity produced from renewable sources and consumed in all types of electric vehicles for the purpose of points (a) and (b), Member States may choose to use either the average share of electricity from renewable energy sources in the Community or the share of electricity from renewable energy sources in their own country as measured two years before the year in question. Furthermore, for the calculation of the electricity from renewable energy sources consumed by electric road vehicles, that consumption shall be considered to be 2,5 times the energy content of the input of electricity from renewable energy sources.

By 31 December 2011, the Commission shall present, if appropriate, a proposal permitting, subject to certain conditions, the whole amount of the electricity originating from renewable sources used to power all types of electric vehicles to be considered.

By 31 December 2011, the Commission shall also present, if appropriate, a proposal for a methodology for calculating the contribution of hydrogen originating from renewable sources in the total fuel mix.”

I’m afraid I can’t be held liable for any migraines induced by clauses a) and b). I suggest we come back to those when we’re feeling at our best.

It’s clause c) that’s interesting. But when we look at the DfT’s RED Consultation document (pdf) this is what they say (on p.39-40):

“11.6.1. Allowing all renewable fuels to receive RTFCs

We propose to remove the specific list of renewable fuels which may count towards a supplier’s obligation to supply renewable transport fuel in article 5(3) of the RTFO Order. Instead the Order will allow the renewable part of any transport fuel to be eligible for an appropriate number of RTFCs.

We believe our proposal will reduce the burden on industry by enabling any newly developed fuels to automatically count towards the RTFO.

The RED permits all forms of renewable energy to be used to count towards the 10% transport target. While the Directive does allow for the use of renewable hydrogen to meet this target, there is not currently a methodology in place for calculating the contribution of hydrogen from renewable sources. However, the Directive does require the European Commission to come forward with a proposal for such a method by 31st December 2011. We do not propose any amendment to the RTFO to allow renewable hydrogen to be eligible for RTFCs at this time but we will keep this issue under review.

Similarly, we do not propose to allow renewably generated electricity for transport to be eligible for RTFCs at this time. Again, we will keep this issue under review.” [my stress]

This is a bit odd, since the EU clearly said in article 3, paragraph 4, clause a) that in calculating the total energy used in transport:

“…only petrol, diesel, biofuels consumed in road and rail transport, and electricity shall be taken into account.”

which is a tad imprecise (presumably the “only” is present because they assume member states will want to minimise this figure), but I think can be taken to mean:

“…all petrol, diesel, biofuels and electricity consumed in road and rail transport, and no other fuel, shall be taken into account.”

and in clause b) more clearly that:

“…all types of energy from renewable sources consumed in all forms of transport shall be taken into account.”

The DfT’s RED Consultation document, then, provides no evidence that we know what the RTFO target should actually be, because electricity used to power transport has not been taken into account.

Furthermore, the argument for electricity is not “similar” to that for hydrogen, as the RED Consultation dismissively states in section 11.6.1 (above).  Unlike for hydrogen, the RED does supply a “methodology… for calculating the contribution [of electricity] from renewable sources”. In fact, it supplies two methodologies!  Pending a proposal for more accurate calculation (due by the end of 2011), the UK could elect to use either the proportion of renewable energy in the EU as a whole or in the UK (RED Article 3, paragraph 4, already quoted above).

Not including electricity makes the 2020 target more difficult to meet, because, both in the EU as a whole and in the UK, the proportion of renewable energy in electricity will be much greater than the 10% RED transport fuel target. Indeed the target under the UK’s Renewables Obligation scheme for the proportion of electricity from renewable sources by 2015 is 15% (keep on these numeric alliterations – must be a word for that – aren’t they?).

And it’s not as if the proportion of transport powered by electricity is trivial, since it already includes the majority of rail, including the London Underground a few trams and the odd remaining milk float!  That’s before we take account of the Climate Change Committee’s targets for electric vehicle uptake!

Why the omission? One possibility is that we don’t care, because we’re quite happy to promote biofuels to an even greater extent more than mandated by the EU.

But this hardly seems likely. Remember I said we’d have to come back to the EU’s clauses a) and b)? Well, I’ve steeled myself with a strong cup of coffee and am ready to tackle it. What these clauses say is that you can count renewable fuel used off-road (in farm vehicles and pleasure-boats etc – the DfT even have an abbreviation, NRMM, “non-road mobile machinery” for this set of vehicle categories) towards the target proportion of renewable road and rail fuel! Completely bonkers, of course. No doubt there’s a reason, some fix they got themselves into trying to implement the policy. Let’s not dwell on that.

The point is that the DfT proposes to scale back its RTFO targets to take account of the inconsistency between clauses a) and b). They lay out policy options (section 11.5, p.28ff) and note (on p.31) that:

Given our concerns regarding the sustainability of biofuel, at this stage we do not wish to see any additional increases in the volume of biofuel supplied in the UK above those already set out in the current RTFO [which did not take NRMM fuel into account]. We therefore propose to pursue Option B [to scale back the annual RTFO targets – which is actually done retrospectively (scaling back targets retrospectively? – we’re definitely not in Kansas any more!) in Table 3 on p.32].” (my stress as usual, as well as comments in square brackets)

A second possibility is that maybe the DfT hasn’t realised the significance of the inclusion of electricity. But this doesn’t seem to be the case. Because there’s another curious passage in the RED Consultation document. On p.50 we find:

“11.7.2. Preventing the use under the RTFO of renewable fuel that has already been used under another obligation

As discussed earlier, the RED has two targets for the supply of renewable fuel. In order to ensure that renewable fuel is not counted twice towards the different targets, we propose to require that suppliers submit a declaration stating that the renewable transport fuel for which they are claiming an RTFC has not been used to discharge any other renewable energy obligation (for example the Renewables Obligation).” (my stress)

But the Renewables Obligation relates specifically to electricity generation!

The DfT’s FQD Consultation document (pdf) adds even more confusion:

  • On p.6, in section 6, “Who should read this consultation?” it includes “a provider of electricity for use in transport”, a category not included in the corresponding section of the RED Consultation document.
  • On p.10 in section 7, “Overview of the FQD” they note very clearly that:

“Furthermore, Article 7a(1) requires Member States to ensure that providers of electricity for use in road vehicles can choose to contribute to the GHG reduction obligation if they can demonstrate that the electricity they provided was used in electric vehicles.” (my stress)

  • On p.14, in section 10, they note that they will:

Establish rules for grouping and the participation of electricity providers for electric vehicles;

  • And they discuss the issue on p.34, in section 11.12, “Electricity for use in road vehicles”:
  • “The FQD requires Member States to ensure that providers of electricity for use in road vehicles can choose to contribute to the GHG emission reduction obligation if they can demonstrate that the electricity they provided was used in road vehicles.We propose to designate electricity providers as being those entities that sell electricity for public consumption. In order for an electricity provider to contribute to the GHG reduction obligation we would require them to supply adequate proof that the electricity they provided was used in road vehicles.

    The European Commission is in the process of considering how to account for the GHG emissions associated with electricity. Initial proposals from the Commission have suggested that Member States would be able to choose between assigning the GHG intensity of electricity used in electric vehicles as being equal to either the Member State average, or the EU-wide average for electricity generally.”

    A strange reading of the RED, which to me is not an “initial proposal”, but an “interim measure”, allowing progress towards the 2020 target to be tracked – more thorough accounting would make the target easier to achieve.

Why, then, has the DfT (or at least the RED Consultation team) ignored the opportunity to meet the RED transport fuel obligation by – at least in part – using renewable electricity? My guess is that there are two main reasons:

  • They’ve baulked at the sheer complexity.  For example, different numbers of Renewables Obligation Certificates (ROCs) are awarded for a unit of energy depending on the technology used to generate the electricity.  Converting them into Renewable Transport Fuel Certificates (RTFCs) would require either knowledge of the energy source or assuming that they are representative of the mix.
  • Vested interests now exist in the biofuel supply market.  Perhaps, although the DfT is now concerned about the sustainability of biofuels, they feel politically unable to reduce the total amount of biofuel in the UK’s quota below that previously assumed (even though, to meet the original quotas more biofuel would have had to be supplied because some would “leak” into the NRMM market and be unable to receive RTFCs).

It seems to me that these problems – assuming my guesses are correct – can be overcome.  A rule (such as an average weighting for all renewable sources on the network) for converting ROCs to RTFCs is perfectly feasible.  And even this is not absolutely necessary, since – to point out once again something the DfT seems to have misunderstood – the EU has allowed assumptions about the proportion of renewable electricity supplied to the transport sector to be made.

If renewable electricity suppliers are denied the opportunity to benefit from the RTFO they have a clear case for complaint. The whole point of the latest EU Directives is surely to ensure that the latest EU thinking – including technological neutrality and effectively a lower biofuel target for 2020, as well as measures to ensure biofuel sustainability – is included in the rules for schemes operated by the member states.

It does not appear that the UK’s RTFO scheme will be compliant with the EU’s RED following the current review.

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