The Likely Impact of Mechanism Change on Renewables Targets in the UK: The Reform of the RO and the Introduction of Feed-in Tariffs to the Policy Landscape

Geoffrey Wood , C EP M L P, University of Dundee

Although the United Kingdom has had a specific delivery programme for RES-E since 1990, the NFFO and RO, the 2010 (10%), 2015 (15%) and proposed 30-35% RES-E target for 2020 are unlikely to be achieved. In response, the Government has reformed the RO. By introducing technology banding, the ‘reformed RO’ will allocate a higher number of ROCs/MWh to less mature higher-cost technologies that have massive deployment potential (e.g. offshore wind, wave, tidal). However, an analysis of the internal and external failures reveals a number of issues of concern: Government didn’t learn from their own actions during the NFFO-RO transition, evidenced by the high level of similarity in internal and external failures (e.g. planning, grid, policy uncertainty, price risk, mechanism complexity, excessive focus on low cost). Although the reformed RO increases subsidy levels and addresses the main external failures, by not addressing the issue of high price/financial risk and uncertainty, and increasing overall mechanism complexity, it can be seen that the major internal failures have still not been fully addressed. This is where reforming the RO could have had a positive impact on improving deployment levels. In relation to the set targets, reform will have little or no impact on the 2010 target. This analysis does agree with modelling that the reformed RO could help in meeting the 2015 target, but diverges from modelling by showing higher deployment levels for the period to 2020. This will again be heavily dependent on a select few technologies (primarily offshore wind), and whether the new and untested measures to combat external failures are successful. Overall, the single most important factor underlying potential increases in deployment is likely to be the proposed extension of the mechanism up to 2037. Despite this, the 2020 target is unlikely to be attained via the latest reform process.

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