GETTING OFF THE GROUND AND OFF THE GRID
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Published: 11 August 2014
This Article was Written by: Katie Hill - My Green Pod
Before leaving office, Greg Barker announced his desire for the renewables industry ‘to be as sexy as the innovators of Silicon Valley’. We’re yet to hear what Matt Hancock and Amber Rudd — the two new junior appointments to the Department of Energy and Climate Change — have to say about making renewables sexier, but the co-founders of OST Energy believe there’s a lot to be excited about.
Simon and Oliver both worked for a large engineering consultancy in the renewable energy sector before they co-founded OST Energy, an independent engineering consultancy that specialises in solar, wind and biomass projects. ‘We both found the renewables sector very exciting and could see its potential for global growth’, says Simon. OST Energy is now one of Europe’s leading technical advisors, and has consulted on well over $10bn worth of renewable energy deals in over 25 countries all over the world.
While its main clients include major investors and banks financing renewable energy projects across the globe, OST Energy’s client base has recently become a lot broader. ‘The investment community is becoming more aware of the renewables industry as a prudent option for both their own money and that of their clients’, says Oliver. ‘New and innovative types of fund and financial product are appearing every year, such as the recent IPOs in the UK and solar- and renewable-related bond products in Europe and the USA.’
You need permits, land, a grid and a fuel supply to make any energy project. If there is sunlight, wind or a heat requirement then there is usually something that can be done. In the UK, planning and grid connections are the biggest hurdles for getting new large-scale renewables projects started. Simon and Oliver have found projects are getting harder to develop as the distribution grid is full in many areas and local opposition to wind farms and solar plants – a key barrier to getting a project through the planning process – seems to be on the rise.
The government has established a functioning framework for renewables under the Renewable Obligation (RO) scheme, which has been successfully deploying renewable projects for years. From October, this will gradually be replaced by Contracts for Differences (CFDs), the framework for which has yet to be finalised. ‘It remains to be seen whether the government’s support for CFDs will enable it to be successful on a scale that will have a significant impact’, says Oliver. ‘Unfortunately, comments about us being as “sexy as Silicon Valley” do not seem to be echoed by the Conservatives’ stated policy of stopping all subsidies for onshore windfarms after the next election. Sexy makes money for UK Plc, sexy does not kill an industry.’
Unfortunately, comments about us being as “sexy as Silicon Valley” do not seem to be echoed by the Conservatives’ stated policy of stopping all subsidies for onshore windfarms after the next election. Sexy makes money for UK Plc, sexy does not kill an industry.’
Oliver Soper, OST EnergyRenewable energy is becoming a significant player in the overall energy market, yet uncertainty around policy in the sector is having the knock-on effect of confusion around thermal generation policy. All the uncertainty is detrimental to both the timing and pricing of a cost-effective energy-secure future; it creates a much harder decision-making process for all sections of the energy industry, as the sector’s long-term focus is at odds with the short-term goals of policymakers. ‘In the UK, if a project has been sensibly located, developed and thought through then the regulations are currently supportive’, says Simon. ‘However, this appears to be changing with the recent announcements on subsidy cuts.’
Europe’s Feed-in Tariffs (FiTs) provide an open and simple framework; a reasonable FiT level in an economy that’s perceived as safe will allow a significant volume of renewable energy, over which the government has limited control, to be deployed in a short space of time. ‘In the open FiT regimes we have experienced, we have never seen a single government prediction of expected capacity to end up as correct’, says Oliver. In some places, the regulations are completely unsupportive; in Ethiopia and the Bahamas renewable energy is not allowed unless it’s owned by the government or the grid monopoly. In Australia, a framework was provided and a very large government contract awarded – but then cancelled.
Breaking down these policy barriers is by far the largest hurdle for new projects in the developing world; the economic and business case is stronger than ever due to the significant technological cost reductions of the last five years. ‘Solar systems have come down in price by around 1,000%’, says Oliver. ‘It is clear the renewable energy world has a very long way to go yet – we are only at the beginning.’
Simon and Oliver agree that that the UK framework for developing projects is generally fair, uncorrupt and straightforward. But Oliver believes the government needs to stick to an energy policy that supports different types of renewable generation within the overall energy mix, and needs clear, long-term policy targets for renewables. ‘If this is achieved, and the mechanisms to achieve these targets – including a fair enforcement of the existing planning rules – are implemented, new projects will continue to be built. More meddling in policy, or further changing of the subsidy or planning goalposts, will weaken the energy sector as a whole and therefore make it harder for new projects to get going.’
While large projects face complicated hurdles, community wind and solar projects are gaining momentum; there are already some great examples in the UK and Germany. The projects help to increase community involvement and education regarding the issues facing the energy industry today. If they continue to be politically supported, as they should be, both Oliver and Simon believe community projects will play a growing role in the deployment of renewables.
‘The Big Six will not be replaced entirely,’ says Oliver, ‘but technology continues to move forward in terms of both cost and efficiency. If domestic electricity prices continue to rise and a net metering principle is brought in, or storage technology continues to drop in price as is expected, with suitable governmental support we may see the Big 6 Million rather than the Big 60,000.’
To find out more about OST Energy, have a look at their website.