Energy market analytics company Aurora says that Britain is not on track to meet the government’s renewables targets without innovation.
Aurora’s report echoes recent analysis from the Climate Change Committee, whose chair Lord Deben said that “the government is failing in much of its implementation” of its targets. The Public Accounts Committee also recently said it is “sceptical” over whether expansion plans for nuclear, solar and wind are credible.
Aurora warned that installed offshore wind will only reach “a little over two thirds of the government’s target by 2030, while installed solar capacity will remain below half of the national target by 2035.”
The UK government has set itself highly challenging electricity generating capacity ambitions for nuclear (24GW by 2050), solar (70GW by 2035) and offshore wind power (50GW by 2030).
Figures published by the Department for Energy Security and Net Zero (DESNZ) show that the UK currently has just over 15GW of solar, 15GW of onshore wind, 14GW of offshore wind, and smaller amounts of hydro and landfill gas.
BREAKING: Newly published DESNZ renewable energy statistics say the UK passed 15GW of installed solar capacity in Q1 2023, with total renewable capacity reaching 54.2GW. 🌞😎🌞https://t.co/5e0n6uQTkJ pic.twitter.com/RNJA7ge1Vu
— Solar Power Portal (@SolarPowerPort) June 29, 2023
Aurora says that innovative financing mechanisms, like combining CfDs with PPAs, or an alternative subsidy scheme, could boost offshore wind’s profitability and encourage accelerated deployment.
Renewables buildout is progressing faster than grid expansion, which is constraining the speed at which projects can connect to the electricity grid. Aurora say that with grid constraint becoming an issue, knowing where to site projects will be key to their profitability.
“Despite significant progress – total power sector emissions fell by 70% between 1990 and 2021 – Britain is not decarbonising fast enough. The country is on track to remain reliant on unabated thermal power after 2035, missing the government’s target of delivering a fully decarbonised electricity system by that year,” Aurora Energy Research said.
Aurora projected that the UK’s installed offshore wind capacity would only reach 35GW by 2030, compared to the 50GW target, while solar would reach 35GW only by 2040, far behind the 70HW by 2035 target.
Innovation is key to progress.
— Aurora Energy Research (@AuroraER_Oxford) June 29, 2023
Creative financing mechanisms, an alternative subsidy scheme, groundbreaking new tools for assessing locational value: all viable routes to incentivising further #renewables buildout and accelerating #decarbonisation.https://t.co/GtX11hJjzr (2/)
With inflation driving up costs, Aurora say that developers need to innovate to ensure project profitability, such as exploiting “multiple revenue streams within a single project,” such as an offshore wind project financed by a government-backed Contract for Difference (CfD), a Power Purchase Agreement (PPA) and a Capacity Market contract has a higher internal rate of return (IRR) than a project relying solely on a CfD,” Aurora said.
The company said that offshore wind farms should also look at innovative subsidy schemes that “would have a higher IRR than if the same project were supported by a CfD awarded in the current ongoing auction round”.
Dan Monzani, managing director, UK and Ireland, for Aurora Energy Research, said: “Despite the undeniable cost increases and uncertainty currently facing the sector, Aurora’s analysis presented at the Renewables Summit illustrates reasons to be optimistic that innovation in financing, policy, and locational business models could help accelerate Britain’s energy transition.”
Ashutosh Padelkar, research associate at Aurora Energy Research, commented: “The CfD is no longer the one-stop shop for financing renewables. You need to innovate, negotiate PPAs, and consider co-location. The market no longer rewards the risk-averse.”