In this contributed blog, Vish Sharma, head of power purchase agreements at npower Business Solutions, discusses the role of independent energy generators in the net zero transition.
Independent energy generators – including organisations with on-site energy assets – have become a crucial part of the UK’s energy generation mix, providing power to homes and businesses across the UK. With the UK government outlining ambitious plans for the growth of renewable energy, what role will independent generators play?
The short answer is – a major role. Not least because these assets provide a reliable and secure source of supply that is largely unaffected by the pressures and volatility of the wholesale energy markets.
This is why it is important to support their development and deployment, particularly when major grid-scale projects take many years to complete.
Taking a step back and looking at the context, there is the feeling that the policies announced so far by the government – including giving the green light to major solar parks, ending the de facto ban on onshore wind, and launching GB Energy – could be given an “A” for effort.
Without a doubt, a major transformation of the energy system needs to happen if the UK is to hit its clean power targets to quadruple offshore wind to 55GW, triple solar power to 50GW and double onshore wind capacity to 35GW by 2030. This has become even more pressing, with the new aim for the UK to reduce its emissions by 81% by 2035 based on 1990 levels, announced at the recent COP29 in Azerbaijan.
However, in our latest report, Clean Power 2030: Harnessing the Power of the UK’s Independent Energy Generators, there were mixed views about whether the policy announcements to date go far enough to hit these targets.
While a third (33%) of independent generators believe government policies will support the development of more independent renewable assets, almost one in four (23%) don’t feel they go far enough yet. Nearly half (45%) are undecided.
The 350 independent generators also told us what they believe to be the main barriers generators face when it comes to developing more assets.
The overwhelming majority (62%) said that planning restrictions are the main barrier, while almost one in five (19%) believed that difficulties associated with securing investment are also a major challenge. One in seven (14%) highlighted timescales to complete a project, while a similar number (13%) cited local community concerns about a project.
Further comments highlighted that grid capacity was also a major stumbling block to developing more independent energy generation assets.
With this in mind, we also asked generators what they would like to see from future government policy.
The top answer was a reduction in “red tape” to help renewables schemes successfully meet local planning procedures, with almost two-thirds (63%) wanting to see this as a key action.
Funding support, such as grants and incentives to encourage more investment in energy projects, was the priority for just over half (56%) of generators. Almost a third (31%) would welcome the development of the PPA market to allow generators more options to invest in assets and sell their power.
Other answers included a stable and predictable tax regime, accelerated grid connection, reinstating or extending the Feed in Tariff (FiT) scheme, ensuring a guaranteed and fair price for energy production, and more support for innovations such as agricultural photovoltaics.
Making sure the voice of generators is heard
We believe it is important that these views are listened to at the highest level. Independent generators will form a vital part of the clean power mix and must be supported if the government is to hit its ambitious targets.
For us, there are three core reasons why the voice of independent generators needs to be heard.
Businesses want to buy energy from independent sources
Independent generators already provide clean and reliable power to many businesses and households across the UK. The government has recognised this, with the relaunched Solar Taskforce looking at how the power generated on commercial premises can contribute to the overall solar goal.
Our research backs this up. Of the generators we surveyed, two-thirds (67%) say they have seen increased business demand to buy power from independent sources over the past two years, with 30% saying this was a significant increase.
In fact, one in five (21%) are already exporting their power to commercial customers via either a fixed or flexible PPA.
The benefits for businesses buying their energy in this way are numerous, including stable pricing, having a guaranteed clean energy supply and greater overall energy security.
They will help the UK achieve its net zero and energy security ambitions
A huge 80% of those surveyed believe that independent energy generators will play a vital role in the low-carbon transition by helping the UK achieve its energy security and net zero ambitions.
With an increasing number of businesses procuring their power from clean energy sources, independent generators can both meet this demand and contribute to the UK’s overall low-carbon strategy.
They provide a reliable and long-term source of clean power
Of those independent generators already exporting their power to businesses, the majority (58%) are doing so through a fixed PPA. One in five (20%) said they currently use a flexible PPA.
For generators, PPAs are seen as the best route to market for their power and a great way to secure additional revenue. Importantly, independent generators recognise that PPAs also give long-term investors confidence in developing a project.
For businesses wanting a safe, secure and reliable power source, independent generation assets can meet demand without navigating the increasing complexities of the wholesale energy markets.
Supporting independent energy generators now and in the future
So, the message is clear. While the moves taken so far by the new government to accelerate the deployment of renewable energy are promising, as we move ever closer to the 2030 clean power target – and the longer-term 2050 net zero target – the government needs to continue to ensure that its policy matches its ambition.
We believe that the only way to do this is by taking the views of independent energy generators into account.
