Current UK Strategy and Performance John Pietryszak Head of New Business Development ScottishPower Energy Retail 19 March 2009 1
Agenda • Energy Policy • Impact and Opportunity • Review of Delivery Mechanisms – The Renewables Obligation – Energy Efficiency – Community Schemes – Distributed Solutions 2
Energy Policy Energy Act • Translating the 2007 Energy White Paper into legislation • Covering all aspects of energy policy, including; Upstream gas, Nuclear, Carbon Capture and Storage, Renewables etc. • The Act aims to improve carbon Change Act management and help transition towards a Climate low carbon economy • Demonstrate international leadership • Set 5 year carbon budgets, with the first three set this year for 2008 to 2022 • The RES considers measures required to Renewable Strategy Energy meet the 15% renewables target by 2020 • Providing financial incentives in support of renewable technology • Targeting electricity, heat and transport 3
Emerging UK Generation Gap Closing the gap: Evolution of existing UK capacity • Coal life extension Peak Demand + • New build renewables, gas, nuclear 90 25% UK Generation Installed Capacity (GW) R en ew ables • Carbon capture & storage? 80 H y dro Peak Demand O CG T an d oil 70 Risks: 44GW 60 CCG T 50 • Certainty over returns more critical 40 than ever 30 • The planning process needs to Coal 20 support the ambition 10 • Demand side policy fails to deliver N u clear 0 its side of the equation 2008 2009 2010 2011 2012 2013 2014 2015 2016 Requires largest generation investment programme in UK history Requires largest generation investment programme in UK history 4
Key Technological Impacts: Power Significant changes to the power supply chain include: Trans- Dist- Generation Trading Metering Supply Tradin Tradin ribution mission g g • Nuclear rebuild • Trading • Grid • DG • Smart Meters • Demand • Nuclear rebuild • Trading • Grid • DG • Smart Meters • Demand exchanges reinforcement connections management exchanges reinforcement connections management • Coal • Coal merging merging • Offshore • Performance • Microgeneration environmental & • Offshore • Performance • Microgeneration environmental & efficiency transmission improvements efficiency transmission improvements • Electric Vehicles • Electric Vehicles investments investments • Electricity • Asset • Electricity • Asset • Carbon, capture • Carbon, capture storage replacement storage replacement & storage and renewal & storage and renewal • Renewables • Active • Renewables • Active technologies & networks technologies & networks growth growth • Smart Grids • Smart Grids 5
The Renewables Obligation ScottishPower part of world’s largest renewable company Operational Operational Under Construction Under Construction Phase I Development Phase I Development • UK’s largest onshore wind farm owner/developer Phase II Development Phase II Development • 17 windfarms, over 380MW operating capacity Beinn Tharsuinn Beinn Tharsuinn • Over 400MW in construction including: - Whitelee 322 MW, largest in Europe Greenknowes Greenknowes Arecleoch Arecleoch Cruach Mhor Cruach Mhor • Over 800 MW in planning Dun Law Dun Law Black Law Black Law Beinn an Tuirc Beinn an Tuirc Lynemouth Lynemouth The impact of the RO in the UK Whitelee Whitelee Callagheen Callagheen Hare Hill Hare Hill Ewe Hill Ewe Hill Elliots Elliots Wether Hill Wether Hill Harestanes Harestanes Barnesmore Barnesmore Dersalloch Dersalloch Hagshaw Hill Hagshaw Hill Corkey Corkey Shell Flats Shell Flats Coal Clough Coal Clough Rigged Hill Rigged Hill West of Duddon West of Duddon Coldham Coldham P&L P&L Carland Cross Carland Cross 6
The Renewables Obligation – Capability 2020 Projected Potential Technology Supporting Policy Measures Capability Capability Strengthen RO Transmission access overhaul Onshore Wind 24Twh 30–33Twh Reform the planning process Technical radar solutions Strengthen RO Offshore grid regime established Offshore Wind 22Twh 36-40Twh Early and rigorous MoD consultation Early and rigorous shipping consultation Accreditation of imported materials Bio Gas 9.4Twh 14-16Twh Co-firing support external to RO Reform MRDF Wave / Tidal / 5.7Twh 10-15Twh Flexible grid access rules Hydro Transform planning process 90-103Twh 61Twh The addition of the Thames Barrage TOTALS Could add a further 17Twh or 5% 17% demand 28% 7
Current demand side policy Energy Efficiency Industry performance from Energy efficiency • Energy efficiency programmes in operation from 1994 • Total energy savings from 2002 equates to 13.5Twh • Almost 6,000,000 houses insulated over the programme • Energy efficiency programmes transformed UK appliance standard, however, there has been no effect on micro generation ScottishPower 1 st to meet its carbon targets through the Energy Efficiency Commitment • Complete 2005-08 obligation 1 year ahead of target • Only company to trade savings as part of the obligation • Insulated over 500,000 houses over the 3-year programme • Issued over 7,500,000 energy efficient light bulbs • Only company to outsource the entire obligation to a third party service provider 8
Current demand side policy Energy Efficiency • The programme is run as an obligation on suppliers to achieve target savings from lowest cost measures • No customer pull for wider energy services, with no market created for innovative solutions Concerns over the design of • All low cost cost insulation measures will be complete by the current Demand side circa 2015 management programmes for • The programme doesn’t identify the whole house needs, focussing only on lowest cost solutions to meet a target energy efficiency • Conflict of interest between energy and social policy • Although it has many issues, overall the programme has been the most effective of its kind, delivering lowest cost carbon abatement of circa £28/tonne CO2 predicted for the next 3years • To be fully effective there is a need for an obligation or incentive on the domestic consumer to build on the energy efficiency measures and make sustainable changes to their behaviour ScottishPower challenges to • There must be a separation of environmental and social the current policy design policy if either is to be addressed • The programme has been run in 3-year segments with no long term certainty, there is a need for longer term targets with over & under carry between phases 9
New demand side policy Community Schemes The new Community Energy Saving Programme is designed to tackle areas with high index of multiple of deprivation • CESP is a programme aimed at tackling hard to treat homes where consumers are most likely to be fuel poor • Schemes are based on a community approach with local authorities having a key role • Suppliers and generators are obligated to meet carbon targets, with higher scores available for whole house approach • Given the social nature of the obligation consumers are likely be given the measures free of charge • The new CESP obligation will not create a market for suppliers or generators to compete within 10
New demand side policy Community Schemes • If correctly designed, CES P could provide a model targeting the social elements of the government policy • The government announced the CESP obligation in September 2008,without any detailed understanding of how Concerns over the design of it would operate the current Demand side • With an expected start date of Autumn 2009, there is still management programmes for uncertainty over the shape and detail of the obligation, we community schemes are concerned that there is limited time to address • The current design places a high administrative burden on both those obligated and the Regulator • We support a community based approach tackling social issues outside of the main Energy Efficiency Policy • The risk associated with the uncertainty of potential scores ScottishPower challenges to for schemes needs to be removed from the design the current policy design • Given the speed of introduction and uncertainty over measure scores, the fine for non compliance needs to be removed from the first phase of the obligation 11
New demand side policy Distributed Solutions Renewable heat incentives and feed in tariffs • Setting the incentives will be critical in ensuring sufficient market drivers without overheating market • The scheme design needs to facilitate a market that creates value for consumers and suppliers • Being overly prescriptive will stifle innovation and product differentiation • A programme of consumer education should go alongside any other programme • The social impact of all environmental policies needs to be understood • Consultations on both schemes are expected later in the year ScottishPower will look to use its expertise in both renewables and energy retail to develop innovative solutions for our customers 12
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