suggesting suppliers are seeking tomeet their volume obligations from lower cost imported biofuels.
PwC RENEWABLE ENERGY VIEW 2015
Future Investment When considering the investment required to deliver the UK’s 2020 targets, electricity generation is expected to continue to require the greatest share of capital. Indeed the capital required to deliver Government’s 2020 generation targets increased during 2014 as a result of the volume of low load factor capacity (e.g. solar PV) being deployed. This has seen DECC increase the 2020 capacity targets by 7GWin order to deliver the existing generation target.
| Figure 2: Electricity generation forecast investment by technology, 2015-20 (£bn) Tidal and wave
Anaerobic digestion Hydropower
Mixed Waste-to-Energy Biomass power
Off shore wind On shore wind Solar PV
fuel obligation is being met through imports, suggesting suppliers are seeking to meet their volume obligations from lower cost imported biofuels.
State of the Renewable Industry
Future investment When considering the investment required to deliver the UK’s 2020 targets, electricity generation is expected to continue to require the greatest share of capital. Indeed the capital required to deliver Government’s 2020 generation targets increased during 2014 as a result of the volume of low load factor capacity (e.g. solar PV) being deployed. This has seen DECC increase the 2020 capacity targets by 7GW in order to deliver the existing generation target. This rise in target capacity brought the total estimated investment required in electricity to £42bn to reach 2020 targets. Offshore wind and solar PV will continue to dominate investment in electricity capacity, although the announcement that the RO will close to large solar PV will see developers competing for CfDs two years sooner than originally expected.
0.5 1.8 1.9 3.4 4.7 5.6 11.7 12.4
This report is solely for the use and benefit of Renewable Energy Association and should not be relied upon by any other party. State of the renewable industry - Investments in renewable electricity, heat and transport PwC
the announcement that the RO will close to large solar PV will see developers competing for CfDs two years sooner than originally expected.
Technology costs remain one of the greatest areas of uncertainty for industry. There are indications that costs are falling rapidly for some technologies, as evidenced by solar PV clearing at £79/MWhfor delivery in 2016/17. Offshore wind continues to track the progress towards a LCOE of £100/MWh in 2020, as analysed by the Offshore Renewable Energy Catapult’s Cost Reduction Measurement Framework (CRMF). The CRMF study showed that industry is broadly ‘on target’, with all finance indicators (e.g. cost of debt, availability of capital) showing scores of ‘on target’ or ‘ahead of target’, suggesting that the target cost reduction is on track to be delivered.
Technology costs remain one of the greatest areas of uncertainty for industry. There are indications that costs are falling rapidly for some technologies, as evidenced by solar PV clearing at £79/MWh for delivery in 2016/17. Offshore wind continues to track the progress towards a LCOE of £100/ MWh in 2020, as analysed by the Offshore Renewable Energy Catapult’s Cost Reduction Measurement Framework (CRMF). The CRMF study showed that industry is broadly ‘on target’, with all finance indicators (e.g. cost of debt, availability of capital) showing scores of ‘on target’ or ‘ahead of target’, suggesting that the target cost reduction is on track to be delivered.
For renewable heat, if the UK is tomeet the 2020 energy target set out in the National Renewable Energy Actions Plan (NREAP) of 72TWh, an estimated investment of £5.9bn is required across bioenergy, heat pumps and solar thermal between 2014-20.3 The NREAP assumes that that investment will be primarily into bioenergy and heat pumps.However, historical investment has favoured bioenergy, with considerably less investment into high-efficiency heat pumps. This poses a risk to achieving the 2020 targets, as a fixed investment volume will deliver less renewable generation if historical investment trends continue. The chart below shows the investment required to achieve NREAP targets and the historical investment share attracted by each technology.
For renewable heat, if the UK is to meet the 2020 energy target set out in the National Renewable Energy Actions Plan (NREAP) of 72TWh, an estimated investment of £5.9bn is required across bioenergy, heat pumps and solar thermal between 2014-20.3 The NREAP assumes that the investment will be primarily into bioenergy and heat pumps. However, historical investment has favoured bioenergy, with considerably less investment
FIGURE 3 FORECAST INVESTMENT IN RENEWABLE HEAT BY TECHNOLOGY TO REACH NREAP, 2014-20204 Figure 3: Forecast investment in renewable heat by technology to reach NREAP, 2014-20204
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
84% 3.7
2014-20 Investment to NREAP targets
Historical Share of Investment 2.2
7% 0.1 Bioenergy Solar thermal Heat pumps
Investment in renewable transport has not been estimated due to uncertainty around whether targets will be met through domestic or imported biofuels.
78 REview Renewable Energy View 2015
Achieving 2020 renewable energy targets It is important to recognise the interaction between individual technology targets inmeeting the overall energy
www.r-e-a.net 9%
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
0
into high-efficiency heat pumps. This poses a risk to achieving the 2020 targets, as a fixed investment volume will deliver less renewable generation if historical investment trends continue. Figure 3 shows the investment required to achieve NREAP targets and the historical investment share attracted by each technology. Investment in renewable transport has not been estimated due to uncertainty around whether targets will be met through domestic or imported biofuels.
Investment in Renewables 4
Achieving 2020 renewable energy targets It is important to recognise the interaction between individual technology targets in meeting the overall energy basis target. Figure 4 illustrates the relationship between the level of renewable contribution from individual areas, in order to meet the overarching target of 15%. DECC’s base case assumption is 30% power, 12% heat and 10% transport. The highlighted values show current contributions from transport and heat, which would require a 52% contribution from renewable electricity
FIGURE 2 ELECTRICITY GENERATION FORECAST INVESTMENT BY TECHNOLOGY, 2015-20 (£bn)
£bn
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