The renewable energy sector is rapidly evolving. With new technology constantly being developed, a widening range of participants becoming involved in the sector and increased government and media attention, developments in the renewable energy sector have the potential to change the way that we look at our electricity systems and provide plenty of exciting new opportunities for lawyers.
As we head towards the end of 2017, we draw closer to the 2020 deadline under the Renewable Energy Directive for the UK to increase the proportion of renewables in its energy consumption to 20 per cent. In 2016, 8.9 per cent of total energy consumption in the UK came from renewable energy sources and renewable electricity represented 24.6 per cent of total generation (energy is also obtained from sources outside of the UK), with wind accounting for 45 per cent of renewable generation, followed by bioenergy at 36 per cent and solar at 12.5 per cent (Source: Digest of UK Energy Statistics 2017).
In many countries, a form of subsidy is provided to incentivise investment into clean energy projects. In the UK, support is given to encourage less developed renewable energy technologies through the Contracts for Difference (CfD) regime. A contract is entered into between the electricity generator and a government-owned entity, under which the generator is paid a top-up between the market price for electricity and an agreed, long-term fixed ‘strike’ price for the electricity it produces. A CfD reduces risk for generators as it provides a guaranteed price for the electricity generated by the project, and therefore makes CfD projects more attractive investments.
Eleven new projects were awarded CfDs in September 2017 in the second CfD auction in the UK. These projects included three offshore wind farms and eight bioenergy plants, which will, once built, together produce electricity to power over 3.5 million homes.
It is not, however, just governments and “traditional” renewable energy generators that are getting involved in renewable energy projects. A wide range of companies from other sectors are increasingly viewing renewable energy as part of their future:
- Other energy companies: For example, Shell, traditionally an oil company, is looking to use its expertise in offshore oil & gas projects to become a leader in offshore wind. It was part of a consortium which was awarded the right to build the $1.4bn Borselle offshore wind farm in the Netherlands in December 2016.
- Corporate consumers: Companies which consume a lot of electricity are increasingly looking to partner with renewable energy projects to fulfil their energy needs. For example, McDonalds UK has entered into long-term power purchase agreements (PPAs) to purchase all of the electricity generated by three wind farms and a waste gasification plant in the UK, which contracts helped to secure funding to enable the projects to get built.
- Tech companies: There are increasing opportunities to pair renewable energy ventures with new technology. For example, start-ups are emerging to develop the use of blockchain, the technology behind Bitcoin, as a way to track how much renewable energy is produced and where it goes to and to develop peer-to-peer energy trading solutions.
Rapidly developing technology is also helping to push the costs of renewable energy down and to change the ways in which renewable energy can be used.
The ability to efficiently store electricity will be key in the future, when our energy mix is more reliant on intermittent renewable generation, and solutions will need to be found to provide a consistent supply of electricity. Improvements in electricity storage have resulted in a number of projects where intermittent renewable generation (such as solar and wind farms) is paired with battery storage, which enables those projects to provide electricity when it is needed and not just when the weather permits.
Electricity storage is also inextricably linked with the rise of electric vehicles. Not only do electric vehicles require the ability to efficiently store electricity but, with more and more electric vehicles on the road, there is the potential for electric vehicle batteries to be used to take electricity at non-peak times and export electricity back to the grid when it is most needed.
Innovations such as this, and rooftop solar panels, will form part of the move towards decentralising electricity generation. More electricity is being produced and distributed locally through renewable energy projects which are viable on a small scale. Electricity generation is no longer the preserve of huge power stations and our electricity grid will need to adapt to meet these changes.
Reductions in costs of technology also mean that we are starting to see subsidy-free renewable energy projects. For example, Clayhill, the UK’s first subsidy-free solar farm (which uses battery storage) opened in September 2017, following a fall in the cost of solar panels by two-thirds since 2010, and Energie-Wuerttemberg and DONG won tenders in April 2017 to supply subsidy-free power from North Sea offshore wind farms.
As projects become commercially viable on their own, there continue to be plenty of opportunities for lawyers to advise both on more established technology and first-of-a-kind projects in the renewable energy sector.
Kate Laidlow is a corporate associate in the global energy group at Herbert Smith Freehills