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Renewables for the win on UK grid

Tuesday, 02 February 2021

In a major milestone, the UK's renewable electricity generation overtook fossil fuel generation for the first time in 2020 according to analysis done by Ember. Renewable energy accounted for a 42% share of the electricity generated while fossils fuels was close behind at 41%. Nuclear energy accounted for the remaining 17%. 

The winds of change 

While it's the first time in the UK whereby renewables have surpassed fossil fuel generation over a year, this trend was witnessed in previous summer months. According to Ember, this increase in Renewable Energy (RE) generation was mainly driven by an increase in wind power that accounted for 24% of the UK's electricity generation in 2020 which was double the share since 2015 and up from 20% in 2019.  

While major growth was seen in the UK wind sector, solar and hydro shares were unchanged when compared to 2019 figures having remained with a 4% and 2% share of electricity generation respectively. It is suggested that the cause of stagnation in these sectors especially in the solar sector is due to a lack of policy support in the advancement of solar technology within the region. 

Bioenergy accounted for 12% of the UK's electricity share in 2020 a slight growth when compared to 2019. This however seemed to be a cause of concern from Ember who regards bioenergy as a "high-risk source of renewable electricity to the environment – for both climate and environmental outcomes – than the other sources such as wind and solar." Ember further outlined the importance in advancing wind and solar technology in order to reduce reliance on bioenergy.  

The rise of a pandemic and fall of fossil fuels 

The share of coal generation in the UK grid fell quite dramatically from a 23% share in 2015 to 2% in 2020. The substantial fall in electricity demand is observed in the UK due to COVID-related lockdowns combined with a sharp rise in RE generation and a near-zero coal generation contributed to the fall in fossil fuel generation, especially in fossil gas that experienced a 5-year low. Fossil gas generation fell by 15% in 2020 when compared to 2019 figures with wind power responsible for overtaking 4% of its generation market share.  Reduction in nuclear energy generation was also experienced in 2020 and Ember attributed this decline to the pandemic and ongoing performance issues with old nuclear reactors in the UK. 

It is important to note that despite these sharp generation declines, fossil gas remains the UK's largest power source with a 37% share on the grid. However, this could change in the coming future as an investment in renewable energy expands. A great example of this is the UK government's 40GW offshore wind capacity by 2030 target that will chip away at the fossil fuel share on the grid in the next decade.  

UK energy consumer's hunger for green 

In a survey done by EY (Ernst & Young), a growing number of UK electricity consumers are taking sustainability into account when choosing energy services and products. EY survey results showed over 60% of respondents were more likely to choose sustainable options.  

The survey gathered the views of 2000 UK energy consumers, of which 40% of under 35's said they would be willing to pay premium prices for sustainable products while 51% mentioned they would be willing to switch to greener energy suppliers if the process was simple and easy to understand.  

This clearly shows that there is a high demand among UK consumers for green energy services and especially domestic supply as the survey also revealed that three-quarters of respondents would rather buy and use locally produced green energy.  

Effects on the green certificates market? 

The European Commission (EC) has stated that from 1 Jan 2021 onwards Guarantees of Origin from the UK (namely REGOs or Renewable Energy Guarantees of Origin) will no longer be recognized by member states. Meanwhile, the administrator of the UK REGO scheme, Ofgem (Office of gas and electricity markets) has stated that they will still be accepting GOs from EU member states from 1 January 2021 onwards. However, they intend to review this arrangement and will likely reciprocate with regards to REGO acceptance in the EU. 

This increase in RE in the UK and further investments in the UK renewable energy sectors will more than likely lead to an increase in the supply of UK REGO's. Furthermore, should Ofgem decide to reciprocate and ban the acceptance of EU GO's in the UK, this will more than likely lead to an increase in demand and price of domestic REGOs with the elimination of EU GO's competition. However, there remains quite a lot of uncertainty on what could/will happen. For further information, see Greenfact's previous article on the possible effects of Brexit on the GO market here.  

Currently  UK wind REGOs for CP20 (REGOs produced from April 2021 to Mar 2022) are trading at over 30 pence. REGO prices and more are available to Greenfact subscribers here. To request access contact info@greenfact.com