Finding an alternative to oil

By Simon Nixon Nov 04, 2005

Simon Nixon

Print this article

Does Britain have a good track record on renewable energy? No. According to the International Energy Agency, Britain is one of the lowest users of renewable energy in Europe – just 3.6% of our electricity comes from renewables – and has a poor track record of investment in new sources of energy. In the 1970s and early 1980s, Britain was at the forefront of research into wind power. But the discovery of North Sea oil put paid to that, leaving other European countries such as Germany and Holland to take up the lead. Moreover, energy research budgets were slashed in the wake of privatisation in the 1980s. These days, utilities target what research funds they have on energy efficiency. Research into new sources of energy is today largely left to universities and big equipment suppliers such as Siemens and GE. That said, the UK government is taking an increasingly active role in promoting alternative energy sources in the UK.

What is the government doing to promote renewables?

It has made a lot of noise about renewables, coming up with an ambitious target for renewable usage, but to date, has refused to put its money where its mouth is. It wants 10% of all Britain’s electricity to come from renewable sources by 2010 and 20% by 2020 and it wants to cut Britain’s carbon dioxide emissions by 60% by 2050. But it has been by and large content to leave it to the market to determine how we get there. The “renewables obligation”, introduced in 2002, requires all energy suppliers to supply a specified and growing proportion of their electricity from renewable sources, but leaves it to the industry to decide how to achieve this. Yearly targets have been set to 2010/11 and the target is to remain in place until 2027.

What effect is this having?

It is helping to fuel a surge of investment in wind power, since this is the only source of renewable power currently close to being commercially viable. Wind currently provides some 20% of Britain’s existing renewables generation (the rest comes from hydro-electric power stations in the Scottish highlands). There are now 1,084 wind turbines at 84 sites in the UK and 22 new wind farms are due to be built this year, adding an additional 474MW of capacity. By the end of next year, total installed wind capacity is due to rise to 1689.7MW, equivalent to 1.3% of the UK’s electricity usage and enough to power one million households. and plans exist for a further 9,000MW of capacity.


Will this enable Britain to meet the government’s targets?

If all the wind farms currently planned get built, wind power would exceed nuclear capacity by 2006 – although it should be noted that there are considerable doubts about the reliability of wind power, with some experts estimating it is only effective 30% of the time. Moreover, planned wind farms must overcome the complexity of the planning laws and opposition from local residents. The government is reviewing the planning laws to try to speed up the process. Either way, experts say that if Britain is to meet the government’s targets, it will need to make use of other sources of renewable energy.

Does that include wave and tidal energy?

Yes. These are probably Britain’s best bet long-term. Britain is thought to have some of the best conditions for wave and tidal generation in the world and is also the world leader in marine power technology. There are currently about 40 marine energy projects around the world but the technologies are still in their infancy and they suffer from a chronic shortage of funds. Three companies – Scottish Power, Portuguese utility Enersis and UK company Ocean Prospect – are soon to trial a wave-generating device at the newly-opened European Marine Energy Centre in Scotland, but it is likely to be years before the technology can be commercialised. The government recently announced it will provide a further £50m to fund investment into wave and tidal power, but experts say this is not nearly enough.

What about other sources of renewable energy?

The other sources of renewable energy that qualify under the government’s renewables obligations include solar power and biomass energy, which burns organic materials, such as sewage or agricultural products. Solar in particular is hugely expensive, but biomass currently supplies 735MW of electricity – more than wind and is expected to play an important role in future UK energy provision. But critics say that without government reassurance about future funding, the industry is unlikely to spend the money needed to develop these new technologies. Lord Oxburgh, chairman of Shell, echoed the views of many when he told the House of Lords, where he is chairman of the Lords Science and Technology Committee: “The government seems to think market forces alone will stop the lights going out. We’re not so sure.”

FREE - MoneyWeek's daily investment emailJohn Stepek

Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.