UK Low Carbon Business Opportunities:

£200 bn in next 10 years

James BealSector Champion – Renewable EnergyUK Trade and Investment

Why Low Carbon in UK

Reduce carbon

emissions

Reduce UK dependency

on imported

fossil fuels

£200bn investment;

half a million jobs

Legal obligation

In 2010 just 3.1% of energy from renewables. This must increase to 15% by 2020

UK Renewables

UK current standing in EU

EU Renewables Target

UK set for growth

Evolving Renewables Obligation

• Original technology neutral regime very successful at stimulating low cost technologies

• ROC Banding to bring forward broader range of technologies

• Multiple ROC’s from April 2009

• ROC currently under review• The RO will remain open for

new accreditations until 31 March 2017

• Will run upto 2027

Band Technologies

ROC’s

Technology ROC’s/MWh

Landfill gas 0.25Sewage gas, Biomass cofiring

0.50

Onshore wind, hydro, Cofiring energy crops, EfW with CHP

1.0

Off shore wind, biomass 1.5Wave, tidal, Advanced biomass conversion (anaerobic digestion, pyrolysis, gasification),energy crops, biomass chp, PV, geothermal, microgeneration

2.0

Feed-In Tariff

•5MW limit•Support for:

• Solar photovoltaic• Wind• Hydro• Anaerobic digestion• Domestic scale micro CHP (2kW)

•Tariffs provide 5-8% returns, •Revenue inflation proof - indexed to RPI for 20-25 years•Degression: year-on-year reduction of tariffs for new installations in line with cost reduction predictions•Built in review, bought forward, fastrack review to slow large PV•Budget cuts

Electricity Market Reform:4 new interventions

Source HM Treasury 2011

Carbon price floor illustration (in real 2009 prices and calendar years)

EPS set at a level equivalent to 450g CO2/kWh with specific

exemptions for plant forming part of UK’s CCS Demo programme

Contract for Difference Feed-in Tariff Capacity Mechanism

Electricity Market Reform

• Introducing – Carbon floor price– Capacity mechanism– EPS to ensure environmental quality– FIT contract for difference

• ROC stays until 2017 for new entrants, although CfD planned to be live from 2015

• Likely to have new delivery institution• Legilsation programme for Spring 2012• Implementation 2014

Renewable Heat Incentive

•Worlds first support mechanism based on the generation of

renewable heat

•Approximately 50% of UK primary energy is used for heat

•Less than 1% currently renewable

•£860m government investment over next four years

•12% of primary energy aims to come from renewable heat by 2020•By 2020 :•13,000 installations in industry;•110,000 installations in the commercial and public sector, supplying 25% of the heat demand in these sectors;•This is seven times the number of anticipated installations in 2014.

Renewable Transport Fuel Obligation•Increasing requirement for % of transport fuel to come from

biofuels

•Obligations have been met (2010 – 2.75%)

•Raises to 5% by 2014

•No clarity beyond

•No investment until clarified

•Plenty of failed investments and negativity

•But advanced / second (non-food crop) generation very interesting

WIND

The UK has

of Europe’s wind resource

- RenewableUK

40%

Offshore Wind –Market

• UK world capacity leader• >1GW passed in April 2010• Project Pipeline

– 14 projects, 1.5 GW in operation

– 2052 MW under construction

– 1619 MW consented– 1900MW in planning– Further 38GW coming

• Costs to come down from £3m per MW

• Roadmap predicts growth of 20% pa

>£80bn Investment Opportunity

Latest Market Predictions

15

Wave and Tidal–Market

• Very early stage protype / first commercial investment

• Tidal stream seems set for growth in medium term

• Wave energy seems more challenging in medium term

• Tidal barrages under investigation (Multi £bln)

Tidal Stream Technology

Onshore Wind –Market

• Proven and investible• Project Pipeline

– 5.7 GW in operation– 3.4GW under construction– 5.4GW consented– 9.1GW in planning

• Variable costs• Challenging planning and

consenting process• Roadmap predicts growth

of 14% pa >£18bn Investment

Opportunity

Bioenergy

18

Bioenergy• Various types of support

– Enhanced ROC for electricity or– Feed in Tariff for AD or– Renewable Heat Incentive or– Renewable Transport Fuel

Obligation

• Estimated by 2020– £25b new capital– 70,000 new installations

• Biomass electricity 8% growth pa but all new plant (much has been co-firing and landfill)

• Biomass heat 12% growth

Others, to name a few….

Green Deal on energy efficiency Waste (outside bioenergy) District heating New grid for offshore wind (c£10-20bln) Enhanced / re-enforced / replaced grid c£20bln Smart Grid / smart meters Green Investment Bank Energy Efficiency in business (Siemens / CT) New Nuclear Nuclear decommissioning Shale Gas?

By 2020– Challenging but massive opportunity (with some uncertainty)

1.8m installations of FIT and RHI £860m support for RHI by 2015 £1bn Carbon Capture & Storage £3bn UK government investment into GIB £18bn Onshore Wind• £25bn in bioenergy related technologies• £20-30bn new and smart grid• £40bn new nuclear £80bn in offshore wind