Renewable Energy: Changes to the Renewables Obligation (Scotland) Order 2010: Statutory Consultation

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Section 5: Offshore Wind Phasing

Summary

  • We propose to allow offshore wind generators to register for ROCs in phases of operational capacity, to allow for the long construction periods.
  • The 20 years support would apply for up to five phases, starting from the date of full accreditation under the ROS, and then once a year for a maximum of five years.
  • Generators would be able to register operational capacity once a year for a maximum of five years for a single offshore station, and for large sections of additional capacity.

Background

5.1 When the UK Obligations were introduced in 2002, the original end date was 2027. However, in light of the 2020 targets and the need to encourage investment in renewables up to 2020, this was recently extended to 2037. A limit of 20 years support per generating station was introduced (subject to the 2037 end date) to avoid overcompensation.

5.2 Under the current legislation, Ofgem are, following application from the operator, able to accredit 5 a station at any point after they have commissioned 6. On application, Ofgem will accredit the total installed capacity of a station upfront, and, as set out in the current ROS Order, the 20 year support starts for the whole station's capacity on that date. The same applies to additional capacity.

5.3 Operators have the choice as to when to approach Ofgem with an accreditation request. Provided that the generating station is commissioned and all other eligibility requirements are met they may choose to apply for accreditation when the generating station first produces renewable electricity. For offshore wind stations, this would usually be when the first turbines are in operation.

Issue

5.4 Offshore wind stations are often constructed over a number of years due to the scale of the projects and the challenges posed by operating in the marine environment. The UK offshore wind industry also face an additional challenge with an underdeveloped supply chain, that can add to overall project build time.

5.5 Offshore wind developers are keen to start receiving ROCs as soon as possible for financing purposes. If they accredit as soon as they commission and start producing eligible electricity from the first turbines installed, the 20 years of support starts before all the turbines are built or operating. With this in mind, the majority of the capacity will receive less than 20 years support, with the final turbines constructed on large offshore windfarms potentially receiving as little as 15 years support on a five year build.

5.6 Alternatively, in order to ensure that all turbines receive 20 years support, operators may wait until the whole generating station has been constructed before applying for accreditation. While this would maximise support, it would delay receipt of ROC income, and could potentially jeopardise the financial viability of some projects.

5.7 As a result, developers have expressed a wish for the support to be "phased" in such a way that they receive 20 years of support for phases of turbines as they are constructed and start to produce renewable electricity.

5.8 Most other technologies do not face this issue, with all the installed capacity being commissioned within a shorter period of time. For instance, although onshore wind stations may also commission before all the turbines are in place, they don't have the same restrictions on building imposed by the offshore environment, and thus construction does not take as long. One obvious and likely exception to this would be for commercial scale arrays of wave / tidal stream turbines.

5.9 The current end date of the RO is 2037 - meaning that phasing will cease to be an issue from 2017, as any new capacity after that point would receive less than 20 years support (barring any extension to the ROS). From 2017, stations will want to accredit all their capacity upfront as the total length of support will be reducing each year - e.g. if a station accredits in 2020, it will receive 17 years support.

Proposal

5.10 In order to account for the longer construction periods associated with building in the offshore environment, we propose to amend the legislation to allow support for offshore wind generating stations to be received in phases, with each phase receiving 20 years' support (subject to the 2037 end date of the ROS). This consultation seeks views on how this should work in practice.

5.11 Allowing each turbine or string of turbines to receive 20 years support would be more complicated and expensive to administer than the current position. As such, we are proposing that offshore wind stations should be allowed to register capacity that has been brought into operation at one point every year for a maximum of 5 years. We propose that this registration should occur on the anniversary of the accreditation date, in line with the current rules governing 20 years of support under the ROS. If a station is going to take over 5 years to build, the generator will need to register all remaining capacity as part of the final phase, on the fifth anniversary of accreditation.

5.12 Five years presents a balance between recognising large projects are constructed in stages, and incentivising projects to build and deploy as quickly as possible. Limiting the number of years should also help to prevent gaming of the system whereby investors install some turbines to secure a particular ROC band, but then delay building the rest of the station. We would welcome views on whether a minimum capacity should be applied to this policy to deter small wind projects from phasing support, which would be an unnecessary administrative cost, and whether a minimum proportion of the accredited capacity should be registered in phase 1 in order for that project to secure a particular band.

5.13 Allowing phasing of support will not change the process by which Ofgem accredits a station or recognises additional capacity. The phases will be portions of the total capacity of the station (or the additional capacity). We welcome views on how this capacity should be split and whether each phase should be metered separately to prevent operators from overstating the electricity, in any one phase, which would be eligible for ROCs.

5.14 In line with the current process, a station would be accredited from the outset for the full consented capacity. The band for each of the phases will be the same as the band awarded at the initial accreditation of that capacity.

5.15 For example, if a station received full accreditation on 25 th September 2012, they would receive 2 ROCs/ MWh for the total capacity of that station regardless of whether the band changed in 2013/14 (factoring in the policy on grandfathering wind). See figure 1 for an example of how this could work in practice.

5.16 The calculations on support levels for the Obligations already assume the whole station's capacity receives the full 20 years support. However, because in reality stations may apply before all the capacity is fully operational, this change may result in a small increase in the total number of ROCs issued. There would also be a very small increase in administration costs, which would be paid for out of the buyout fund.

Figure 1: Example for station A, 1000 MW, beginning generation in 2012

Figure 1: Example for station A, 1000 MW, beginning generation in 2012

Questions

  • Do you agree with the proposal to phase support for offshore wind to account for the longer construction period? Do you agree that phased support should only apply to offshore wind generators?
  • Do you agree that phasing of capacity should be limited to once a year for a maximum of 5 years?
  • How do you think the capacity to be included in each phase should be determined, e.g. split equally or based upon operational capacity? Please give your reasons.
  • Do you think each phase should be metered separately or would a pro-rata approach be more appropriate?
  • Do you agree that the band applied to each phase should be the same as the band awarded at initial accreditation of that capacity?
  • Do you think a minimum accredited capacity or any other criteria should apply to this policy, i.e. the station or additional capacity must be a certain size to qualify? If so, what do you consider this should this be?