Energy Policy – innovation and governance

1. Energy Policy – innovation and governance University of Cardiff May 2012 Catherine.mitchell@exeter.ac.uk

2. Overview • What’s the point of EP? • UK Carbon Budgets • 80% cut by 2050 on 1990 levels • Very different energy system • Technologies • Infrastructure • Practices – business and individuals • Needs lots of change • British energy system has not changed underlying system very much • Some other countries seem to be doing better • Governance – basically meaning ‘the rules of the game’ makes a difference to innovation

3. Innovation • Complex to define • Used here as change which is wanted • Ie sustainable innovation • Not just about technologies but also practices

4. Energy Policy Goals and Roles • What goals do we have for our society? • EP should be helping to enable that policy • Within this energy policy, what roles for • the state? • the market? • individuals/customers? • business? • Answers to these questions lead to the sort of EP to be followed

5. 4th Carbon Budget UK Committee on Climate Change (CCC, 2010)

6. CCC, 2010

7. Chairman’s Summary for 4th Budget

8. Projected UK electricity use, CCC 2010 – about 350 TWh more low carbon

9. Capacity Retirements 2020-2030

10. TransitionNeeded

11. Where is this low carbon coming from? Nuclear and RE [CCC, 2010]

12. CCC, 2010(as a comparison Nuclear provided 56.5 TWh or about 16% in 2010)

13. Energy Policy in the UK • Energy Policy in the UK focussed on enabling nuclear power • Increasingly untenable • Major changes to electricity market to eliminate risk for nuclear power investors • Contract for Difference FITs – a strike price linked to the electricity price • For nuclear, CCS and renewable energy • Carbon price floor - £70 t / C by 2030 • An emission performance standard • A capacity payment (of some description) • More of the same: centralised, supply, far from demand centres • Customers will pay, whatever the tab • Narrow thinking about what energy policy is for • To the extent good for nuclear – probably no worse for RE except not clear if there will be an obligation

14. Governance in Britain • Differs between England and Wales (E&W), Scotland and N.Ireland • Energy Policy is not a devolved area but RE and Energy Efficiency is • From a big picture perspective • Policies have changed • Increasing RE, EE etc • But balance of underlying incentives – ie who/what makes money (costs versus revenue) from the whole picture of energy has had limited change • Not inclusive but exclusive • Difficult for new entrants • Top down • Incumbants seen as executors of EP • Strong underlying philosophy that markets / quasi markets are preferable to regulation • Frameworks ok; strategic planning a step too far • Limited change in technologies, infrastructure, industry structure, practices • Some new technology companies • 99% of supply still in hands of big 6 • Still supply orientated • Practices still largely the same • 7% of electricity now from renewables, about 3% in 1990

15. PV for a while was different • FIT for under 5 MW • In just over a year, 120,000 generators and 150,000 sites • Payments high • Debacle over reduction in payments • PV really is a game changing technology

16. Governance in Germany • Major manufacturing country of Europe • Industrial policy and economic well being important • Strategic frameworks are embedded and important to society • History of federal, regional and municipal links • Pragmatic about how outcomes are achieved • Markets versus regulation • View that risk needs to be reduced to increase investment • Made choice on nuclear • Incentives (rules of game) about how companies / people make money have changed • Technologies • Practices • Increasingly infrastructure • Inclusive, holistic policies • Incumbents still in charge of supply to customers (ie Big 4) but unable to influence EP direction • RE, EE, transport, infrastructure • Local versus federal • Behaviour

18. Other examples • California and demand reduction • Public Utilities based on rate of return • Uses about 50% less electricity than the average in US and about 40% less petrol • Upper Austria • Domestic energy has reduced by about 20% in last 10 years • Denmark • Integrated framework for demand reduction on track to reduce total energy use by 25% by 2050

19. PV the game changer[REN21 GSR 2011]

21. Governance essential not just for unlocking PV potential • Infrastructure • Regulation – changing the rules of the game • inclusivity • Peak prices drop • Missing money • Flexibility and back up • Eg interconnectors • Hydro belt as balancers • Denmark versus British policy • Lifestyles and practices

22. Energy policy decision tree