Archive for the ‘Microgeneration Certification Scheme (MCS)’ Category

What are Feed-In Tariffs?

Saturday, April 3rd, 2010

The Government is introducing a system of feed-in tariffs (FITs) for small-scale low-carbon electricity generation from 1 April 2010. FITs are a per-unit support payment made directly to generators by electricity suppliers.

The new renewable electricity Feed-in Tariff scheme (FITs) will be available from 1 April 2010. FITs aims to promote domestic and small-scale renewable generation technologies up to a maximum capacity of 5 megawatts (MW). Ofgem will be running the behind the scenes administration of the scheme on behalf of the Department of Energy and Climate Change (DECC).

There are two routes to apply for FITs depending on the type and scale of technology installed:
• Generators with Microgeneration Certification Scheme (MCS) accredited solar, wind and hydro generating equipment up to 50kW in capacity that are installed by an MCS accredited installer can apply direct to a ‘FIT supplier’ – usually their energy supply company – with their installation details and to enquire about FITs payments. We expect the majority of installations will fall into this category.
• Generators with larger installations between 50kW and 5MW (or anaerobic digestion at 5MW or less) will first need to apply for accreditation through Ofgem’s Renewable and CHP Register before they can apply to a supplier for the tariffs.

Its intend that FITs will replace the Renewables Obligation (RO) as far as possible as the financial support mechanism for microgeneration (with a declared net capacity 50 kW or less) in Great Britain.
FITs will complement the RO by providing the simplicity and certainty needed to support householders, communities and businesses involved in small-scale generation. Installations with a capacity of 5MW or less will be eligible for FITs. Whereas the level of reward under the RO is exposed to fluctuations in the value of Renewables Obligation Certificates (ROCs), FITs will guarantee a fixed level of reward for each unit of electricity you generate, for as long as you are eligible to receive support.The Feed-In Tariffs are based on the electricity generated by a renewable energy system and there will be an additional bonus for any energy which is ‘exported’ to the grid. This means you get paid more for the energy you don’t use than for that which you do which encourages energy efficiency.

At times when you are producing less electricity than you are using, the shortfall will be ‘imported’ from the grid and you will pay your electricity company for this in the usual way.

The Feed-in Tariff therefore gives you these three financial benefits:

  1. A ‘generation’ tariff based on the Total generation and the energy type, plus
  2. An ‘export’ tariff for any energy Exports when generating more than you need, and because you are now producing some of the energy you use
  3. Lower bills from your supplier for the energy you Import from them

What you need to do
You will require an additional electricity meter to measure the electricity that your system is generating, and also to measure how much is being fed back into the electricity grid.

Once you have installed your generating technology you must inform your chosen energy supplier that you are eligible to receive the FIT. The supplier will then register your installation onto the Central FIT Register, which is administered by Ofgem. Payments will be made by your energy supplier at intervals to be decided between you and your supplier. You may be required to provide meter readings to the suppliers if requested.

If you want to opt out of the guaranteed export tariff you must inform the supplier. You may want to do this if you chose to use a power purchase agreement.
Tariff levels, for technologies installed between 15th July 2009 and 31st March 2012

Technology___________Scale____________Tariff level (p/kWh)________Tariff lifetime (years)
Solar electricity (PV)____≤4 kW (retro fit)___ ____41.3____________________25
Solar electricity (PV)____≤4 kW (new build)______36.1____________________25
Wind_______________≤1.5 kW____________34.5_____________________20
Wind _______________>1.5 – 15 kW________ 26.7 _____________________20
Micro CHP ___________≤2kW _____________10.0 _____________________10
Hydroelectricity _______≤15 kW ____________19.9 _____________________20

Tariff levels vary depending on the scale of the installation.

The tariff levels shown in the table above apply to installations completed from 15th July 2009 to 31st March 2012 for the lifetime of the tariff. After this date, the rates decrease each year for new entrants into the scheme.

All generation and export tariffs will be linked to the Retail Price Index (RPI) which ensures that each year they follow the rate of inflation.
What payments will you be eligible for, and how can you claim them?

The tariffs available and the process for receiving them vary, depending on when the technology was installed, and whether the system and the installer were certificated under the MCS scheme:

The following advice applies to domestic installations. If you have installed a qualifying electricity-generating system non-domestic property with a grant from the Low Carbon Buildings Programme, see the Low Carbon Buildings Programme website for further guidance.

In October 2008 the UK Secretary of State for Energy and Climate Change, Ed Miliband, announced that Britain would implement a feed-in tariff by 2010, in addition to its current renewable energy quota scheme Renewable Obligation Certificates”. In July 2009, he presented UK’s new Feed-in Tariff Programme, expected to begin in early April, 2010. Miliband has given a new name, “clean energy cash back”, to this policy which falls fully within the framework of Feed-in Tariffs and is based on a few, extensively discussed, key elements:

a) Less than 10% of Britain’s electricity consumption, by 2020, will be provided by renewable energy sources. The 2% target requires the “green generation” of only 8 billion kWh (that is 8 TWh) per year. France, thanks to its system of Feed-in Tariffs, in 2008 generated already nearly 6 TWh, and only from wind energy; in the same year Germany generated more than 4 TWh from solar PV (photovoltaic), and reached 40 TWh from wind energy.

b) The project involves only renewables sources which can produce less than 5 MW energy; so, UK’s new FiT’s project cap is 5 MW. Depending on law, only renewable energy sources and generators within this cap can benefit from tariffs: the government still prefers resorting to the Renewable Obligation Certificates mechanism for developing larger projects.
To prevent companies from moving large scale (for example big wind) projects from the ROCs to the Feed-in Tariff programme, a number of anti-gaming provisions has been inserted in the policy design; this should avoid the breaking up of bigger projects into several small ones, to fit within the 5 MW energy size cap.

c) The contract term is 20 years, 25 years for solar photovoltaic projects: this means that, starting from 2010, British providers of Wind Energy, Hydropower, Energy from Biomass and Anaerobic Digestion falling within the Renewable Sources eligible in accordance with the provisions of the proposed FiT scheme will be rewarded with a tariff rate guaranteed for the next 20 years – 25 years for Solar PV generators. In this way UK’s renewable energy industry has a somehow long-term certainty, and can advantage of the FiT over other policy options.

d) Costs for the programme will be borne by all British ratepayers proportionally: all electricity consumers will bear a slight increase in their annual rate, thus allowing electricity utilities to buy renewable energy generated from green sources at above-market rates set by the government.

e) Generators can be green fields (they do not have to be metered customers).

f) The new UK’s Feed-in Tariff Programme review is scheduled for 2013.

UK wind energy market

Tuesday, May 19th, 2009

Overview of the UK wind market in 2009

The UK was one of the first countries to develop wind turbines in the modern era, and had a strong technological position in the 1980’s. When the commercial markets started to become established in the 1990’s however other counties adopted more business-friendly approaches and the lead was lost to Denmark in the first instance.

The first wind-farm was developed in the UK at Delabole in Cornwall in 1991, under the Non-Fossil Fuel Obligation.

Wind energy market and trends

Because the major driver for the industry is currently the Renewables Obligation, the main market is for merchant bulk generation through onshore wind-farms. Some 55% of the onshore wind capacity is owned by the licensed electricity suppliers on whom the obligation falls, and the vast bulk of this is the ‘big six’.

A further 20% or so is held by wind energy developers, who have retained some of the projects they developed, and the balance by dedicated ownership companies (some of which may in turn be owned by the groups listed above).

The renewable energy sector, including wind, is currently suffering from the economic circumstances common to the entire world economy. In particular there are constraints in obtaining project finance, and this is expected to inhibit growth in the short term. The forward projections in this report assume that this is a short term issue and that credit starts to flow again during the course of 2010, and more normal investment conditions return by 2011. That, however, is not a prediction!

The wind sector is expected to remain the highest growth part of the renewable electricity market for the immediate future, and the targets of 14MW onshore and 14MW offshore should be achievable provided that the planning and grid restrictions are eased.

Structure of the industry

As mentioned above, the UK lost its lead in wind energy technology as the large scale market started to develop twenty years ago. Except in the small wind sector (see below), the majority of wind generation technology is imported, though the UK does have some supply-chain capability in certain related components, such as blades and towers, and has aspirations to increase this capability.

The major domestic capability is in project development, financing, management, operation and maintenance. The UK has several strong project development companies, most of which also operate in international markets, such as the McAlpine subsidiary Renewable Energy Systems. It also has some of the leading international consultancies on wind energy technology, such as Garrad Hassan.

All leading wind turbine manufacturers supply into the UK market. Siemens was the largest supplier in 2007 and 2008, and is now second in terms of cumulative capacity behind Vestas. Other major suppliers in the last two years have been Nordex, Repower and Enercon.

Offshore wind

In 2001, eighteen companies successfully pre-qualified for Round One site development options and to date five windfarms have been completed: North Hoyle off northern Wales, Scroby Sands off Great Yarmouth, Barrow off the South Cumbrian coast, Burbo Bank off The Wirral and Kentish Flats in the Thames Estuary. Two more, Inner Dowsing and Lynn are nearly complete and delivering energy to the grid. There are a number of others either under construction or planned for the future.

In 2003 Crown Estate announced a competitive tender process for Round Two sites. The Crown Estate announced fifteen successful Agreements for Lease amount to 7.2 GW and including sites within and beyond territorial waters. The largest of these was the 1GW London Array in the Thames Estuary, originally developed by a partnership between E.On, Shell and Dong. In 2008 Shell pulled out of the project and sold its interest to the other two partners, and Masdar subsequently acquired part of E.On’s stake. There is still no firm information on when the project will proceed.

The competitive tender process for the licensing of Round Three offshore windfarms closed in March 2009 and, the Crown Estate announced it had received multiple bids for each of the nine zones, confirming the potential capacity to achieve 25 GW of offshore wind energy by 2020. There were a total of 40 zone bids from 18 different consortia, including international companies from at least nine different countries

Small wind

The UK has an increasing number of producers of small wind turbines in the range up to 50kW. The best established of these is Proven in Scotland. Wind turbines hit the volume market when Glasgow-based Windsave negotiated a supply agreement with the national DIY chain B&Q. There are now a number of other devices on the market, mostly horizontal axis designs, but some using more novel approaches, such the vertical axis Quiet Revolution device.

Licensing, certification and legislative issues

Projects wishing to benefit from the Renewables Obligation need to be accredited by Ofgem to confirm that they meet the requirements. For wind projects this is typically quite straightforward. There is a procedure for obtaining indicative pre-registration to assist with project financing.

Small scale systems to be installed under the Low Carbon Buildings Programme need to be certified under the Microgeneration Certification Scheme (MCS). The companies selling such systems must be members of the REAL Assurance Code of Conduct and installers need to be accredited under the MCS. It is anticipated that similar requirements will apply to the renewable electricity tariffs.

There is currently no preferential tax treatment for wind energy installations, though they may in future be eligible for Enhanced Capital Allowances.

Market entry, barriers and opportunities

The UK is in principle a very open market. The renewable energy targets it has adopted to meet the EU Renewable Energy Directive require a ten-fold increase in renewable energy delivery in little over a decade. It is anticipated that most of this growth will come from the electricity sector and of that much will come from wind.

Bulk energy production

The most self-evident opportunity for overseas companies is in the supply of the core technology, especially wind turbines and power trains. In view of the medium term potential of the British market, there will certainly be opportunities for established suppliers, who need to expand their capacity, to set up subsidiary or licensed plant in the UK. Both national governments and regional agencies would be very supportive in bringing forward new capacity of that type.

The UK has a well established network of project developers, who are familiar with the process and particularly with the best ways of structuring projects to accelerate their progress through the planning and grid connection requirements. Companies interested in bringing forward projects would be well advised to work with incumbent players, especially in light of the obstacles facing developments described above.

The UK already has the world’s largest offshore wind capacity and this sector is projected to continue to grow strongly. Therefore this will present opportunities not only for wind energy technology but for the expertise and facilities associated with installing and operating plant offshore.

Decentralised wind energy

Though the bulk energy market has been the one where most development has happened in the past, the decentralised energy sector may be an equally exciting one for the future. New drivers, such as the renewable electricity tariffs and the Carbon Reduction Commitment, should stimulate a lot of new demand in this sector.

This will create new opportunities for those with expertise in community projects, energy services companies and technology aimed at energy users rather than energy suppliers.

All in all the UK promises to be a very interesting wind energy market in the coming decades!