SC(3) CR-E8
Sustainability Committee
Inquiry into Carbon Reduction in Wales: Electricity Generation (including renewable energy)Response from RWE npower
Virginia Hawkins
Sustainability Committee
National Assembly for Wales
Assembly Offices
Cardiff Bay
CF99 1NA
14th March 2008
Dear Ms Hawkins
Thank you for providing the opportunity to input into the current Sustainability Committee inquiry into carbon reduction in Wales. RWE npower has significant electricity generation assets in Wales and over the next few years RWE npower will be making significant investments to reduce our emissions of greenhouse gases in the UK. We have recently announced investments in new renewables, new gas fired power stations and improvement in efficiency of existing stations. These investments, together with closure of older coal-fired power stations will put the company on track to reduce the amount of CO2 emitted per unit of generation from our UK power stations by around 33% by 2015 compared to 2000, and by 50% compared to 1990 levels. However, Wales is an integral part of the UK solution to CO2 emissions reduction and cannot be considered in isolation. In particular it should be noted that although CO2 emissions from our power stations in Wales could increase as a consequence of investment in new and existing fossil-fired plant, overall UK emissions will fall.
Npower Renewables Limited, part of the RWE group, is a leading developer and operator of renewable electricity generation projects in Wales. We currently operate a wide portfolio of projects including 7 onshore wind farms, the UK’s first major offshore wind farm at North Hoyle, North Wales and 7 hydroelectric projects in and around the Snowdonia National Park. In addition, Aberthaw Power station has invested in the opportunity to co-fire biomass material i.e to optimise the firing of renewable fuel. In 2007 the station completed the final stage of a £10M investment in a solid biomass operation.
Our commitment to the future of renewable electricity in Wales is also strong. Npower Renewables Limited has recently commenced work on a second offshore wind project, Rhyl Flats. We await Section 36 determination on our 3rd offshore development off the coast of North Wales, Gwynt y Môr and have also been an active and successful participant in the Tan8 spatial planning tendering process. We have also recently announced a partnership with Bristol-based tidal power developers Marine Current Turbines (MCT) to help deliver one of the world's first commercial-scale tidal stream projects, off the coast of Anglesey, north Wales.
Our responses to the specific questions on electricity generation are set out below.
CO2 Consultation Questions (Energy Generation)
General questions.
1. Is the proposed 3 per cent annual reduction target by 2011 'in areas of devolved competence' sufficient to enable Wales to make its full contribution to meeting UK-wide targets? If not, what targets should be put in place?
We agree that action needs to be taken to ensure that Wales makes its full contribution to meeting UK-wide targets but do not believe that it is appropriate to set CO2 reduction targets for Wales in addition to the targets agreed at EU and UK level which will apply to the UK as a whole. We note that the proposal would be for 'areas of devolved competence’ and would not presumably directly apply to electricity generation but any targets would need to consider interactions with targets set by the EUETS and also the proposed Climate Change Bill.
Any target for Wales would need to be consistent with the overarching EU and UK targets in a way that does not lead to duplication or double counting of emissions reductions. In addition to the targets set at UK and EU level for CO2 reductions, any targets for Wales should take into account the binding targets that will be set for the UK as a whole for energy from renewable sources and also the non-binding target on energy efficiency.
The long-term target to reduce overall UK emissions by 60% by 2050 will require significant investment in new technologies. There will need to be a transitional period (to 2020 or 2030) where as a consequence there could be increases in emissions from Wales due to, for example, closure of other assets in the UK (including nuclear power stations) with increasing levels of fossil-fired electricity generation in Wales.
2. Should the emission reduction target be based on Welsh consumption, or production, or both (ie should it take into consideration the carbon dioxide generated in Wales (production), or the carbon dioxide emissions that Wales' residents are responsible for, regardless of their source (consumption)?
Emission reduction targets should be based on areas that can be influenced by actions in Wales and that are consistent with other policy objectives for example economic development. There is little point in reducing emissions in Wales if this results in development with increased emissions occurring in England. Similarly if Wales can contribute to improvements in emissions intensity (for example through investment in new more efficient industry and production methods) this could result in an increase in emissions in Wales but will lead to an overall reduction in UK emissions.
It may be more appropriate to set targets for Wales in terms of specific outcomes rather than as tonnes of CO2 either emitted or consumed. Policy for specific emission reductions should target sectors which are not exposed to carbon leakage between Wales and the rest of the UK.
Questions specific to transport emissions of carbon dioxide:
3. What particular challenges does Wales face in reducing carbon dioxide emissions from energy generation, and how can these challenges be overcome?
Rather than focusing on reducing direct emissions of carbon dioxide from energy generation which will be covered through the requirements of the EUETS directive, the National Assembly should address the challenges of increasing levels of low carbon generation and reducing consumption of electricity.
Renewables
Wales benefits from excellent renewable energy resources and is very well placed to contribute to the overall UK targets for electricity generation from renewable sources. Action should be focused on addressing barriers to deployment of new renewable capacity to ensure these resources can be deployed as quickly as is possible. Action to date has been positive, in particular the development framework provided by the Tan8 policy. However, delivery against the Tan8 targets has been slow and we hope that any future revisions of the policy will build on lessons learnt.
Of particular concern to us is the lack of sufficient grid infrastructure to enable new renewable projects to connect to the grid, in particular the lack of physical infrastructure in mid-Wales but also the heavy utilisation of existing infrastructure in South and North Wales. While the Tan8 spatial planning process has successfully identified areas of good renewable resource and provided a framework for development, the lack of grid in these remote areas will inhibit achievement of Tan8 targets if not urgently addressed.
Significant investment in new infrastructure is required. We believe the best way to achieve this is to ensure that investment is driven by the requirements of projects being developed - in this regard we recognise our responsibility to commit to the necessary infrastructure development. It is also critical that public opposition to new pylons and overhead lines does not halt development. We believe the Welsh Assembly Government has a responsibility in ensuring that local impact and cost issues associated with new infrastructure do not cause further delays.
We believe that the Renewables Obligation has been successful to date in bringing forward the most economically viable renewable technologies. We are also confident that the proposed reforms will encourage further deployment of near commercial technologies, such as offshore wind and biomass. As a developer with a UK portfolio, consistency of policy across the UK is of great importance to us and we would encourage the Welsh Assembly Government to consider this in any future proposals.
We regard the New Renewable Energy Route Map for Wales as a positive step by the Welsh Assmebly Government to progress the deployment of renewables through specific actions. We look forward to providing detailed comments through the separate consultation process.
Combined Heat and Power
Combined Heat and Power (CHP) installations are able to operate at efficiencies of over 80%, and as high efficiency CHP plants save at least 10% of primary energy input compared to the separate production of heat and power, there are both savings on fuel consumption and therefore CO2 emissions. This helps to address business competitiveness as well as reducing carbon footprint.
CHP therefore provides the opportunity to efficiently generate electricity whilst serving a heat load, and so is thus defined by the existence of a heat load. 7% of UK electricity is currently generated in this way, and in the October 2007 DEFRA report on UK CHP potential, over 16GWe of economic potential is identified in 2015 (current capacity is just 5.5GWe - DUKES 2006). Over 20% of this additional potential is with refineries and LNG, with nearly 65% in low / medium temperature industries (e.g. chemicals, paper, food and textiles).
In line with the UK Governments 2010 target of 10GWe of CHP and the 2015 economic potential, opportunities to develop CHP in Wales (renewable and gas fired) should therefore be identified and actively encouraged. Barriers to the development of such schemes to date have included the level of required capital (higher than for heat only plants) and regulatory uncertainty with regards to support mechanisms for CHP.
Large scale CHP must be the primary focus, with regards District Energy / Heating schemes, the opportunities to employ the technology retrospectively on developments are low due to the poor economics. This is reflected in the October 2007 DEFRA report on UK CHP potential. However there may be some opportunity to develop schemes on new developments such as at the proposed St Athan military base. However the zero carbon homes target is likely to reduce the heating requirements of new homes which will further impact on the economics of district heating schemes.
4. Do the current energy policies of the Welsh Assembly Government give sufficient emphasis to carbon reduction through low carbon energy generation?
We support the emphasis given in the 'One Wales’ strategy document for achieving sustainable energy production and consumption. In particular developing an energy strategy integrated with the planning framework to include actions on energy efficiency, microgeneration, eco roofs, diversified renewable energy generation and biomass, and improved advisory services.
We welcome the publication of the Renewable Energy Route Map for Wales and will be responding to this consultation.
To support the development of CHP in Wales, and further the Welsh contribution to the UK Governments 2010 target of 10GWe of CHP and the 2015 economic potential, opportunities to develop CHP in Wales should also be identified and actively encouraged. This will help decarbonise the Welsh market for heat through greater energy efficiency and the use of renewable fuels where possible.
5. To what extent has the Welsh Assembly Government been successful in utilising the powers available to it in order to reduce carbon dioxide emissions from energy generation?
Investment in fossil-fired electricity generation in Wales is likely to increase emissions in the short to medium term. For example although RWE npower has invested significantly in upgrading the turbines at Aberthaw Power Station to improve the station efficiency, the overall emissions from the power station are likely to increase from 2008 onwards. Investment in FGD equipment at the station rather than closure by 2015 as will be required for other plant in RWE npower's portfolio will mean that the station will generate more than in recent years. Similarly the potential investment in a highly efficient combined cycle gas power station at Pembroke will result in an increase in emissions from Wales even though emissions from this station will be well below the average for electricity generation across the UK and will significantly contribute to meeting the UK’s 2020 goals.
6. Could alternative targeting of Welsh Assembly Government financial resources lead to greater emission reduction from energy generation than is currently being achieved? If so, where could additional resources lead to greatest impact? (Please provide detail to support your evidence).
Additional low carbon generation which would contribute to lower UK emissions could benefit from additional financial resources. In particular investment in renewables, CHP schemes and energy efficiency measures which would contribute to a reduction in overall emissions.
It is worth noting that the proposals for the revision of the EUETS directive recommend that 20% of auctioning revenues from 2012 onwards should be used to reduce greenhouse gas emissions. If this proposed change is accepted in the directive and is adopted by the UK the National Assembly Government should investigate whether the revenues that could be attributed to Wales (the current proposal is for auction revenues to be distributed on the basis of 2005 emissions) could be used specifically for investment in Wales.
7. What examples from other administrations (devolved, UK, and overseas), where other means have been used to achieve reductions in carbon dioxide emissions from energy production, could be adopted in Wales under current powers?
8. In the context of the Government of Wales Act 2006, which further means of reducing carbon dioxide emissions from energy production could only
be achieved with the introduction of further legislative competence for the National Assembly for Wales?
Reducing emissions from energy production will be achieved through the EUETS and renewable energy targets also set through the EU Commission. We do not believe that there are additional legislative requirements for reductions of emissions from electricity generation.
9. If specific carbon dioxide emissions targets are to be set for Wales, should those targets be subdivided into shares by sector? If so, what share of the total should reductions as a result of energy generation comprise?
It is not clear what is meant here by energy generation - for example does this refer to electricity generation or also include industries such as refining? The electricity generation sector has effectively been set emissions reduction targets through the EUETS at a Europe-wide level. It would be difficult to see how any further sectoral targets set for electricity generation either at UK or Welsh level would be practical to implement.
However the UK is likely to also have a target for achieving 15% of total energy use from renewable sources. This will be a challenging target and it may be appropriate for Wales to consider what share of its energy production should be from renewable sources and what may be required to facilitate this in addition to support mechanisms, such as the Renewables Obligation, set at UK level.
Please do not hesitate to contact me if you would like any further information on this response.
Yours sincerely
Penny Tomlinson
Environmental Strategy
