UK Renewable Energy Industry Hit By Government Subsidy Cuts
The UK renewable energy industry is set to encounter a new wave of subsidy cuts affecting large-scale and rooftop solar, as well as wind.
The Department of Energy and Climate Change announced Wednesday consultations on ending the effective Renewables Obligation support for solar farms, as well as plans to possibly change the rules governing the country’s Feed-in Tariff for rooftop solar and medium-scale onshore wind projects. Such changes are aimed at making it increasingly difficult for entities to take advantage of the FiT scheme.
The UK Department of Energy and Climate Change (DECC) started off its press release by stating the intended measures were “to deal with a projected over-allocation of renewable energy subsidies.” Of course, the measures were classified as an attempt to reduce “energy bills for hard working British families and businesses,” as well as an attempt to meet “climate goals in the most cost effective way.”
In announcing the measures, Energy and Climate Change Secretary, Amber Rudd, said, “My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way.”
The DECC laid out the list of measures that it was introducing, and are listed below with their appropriate DECC links:
- Removing the guaranteed level of subsidy for biomass conversions and co-firing projects for the duration of the Renewable Obligation, known as grandfathering. This could reduce the risk of more allocations under the LCF by around £500m per annum in 2020/21 (i).
- Launching a consultation on controlling subsidies for solar PV of 5MW and below under the Renewables Obligation (RO). This includes consulting on early closure and removing the guaranteed level of subsidy for the duration of the RO, known as grandfathering.
- A consultation on changes to the preliminary accreditation rules under the Feed-in Tariff (FIT) scheme followed by a wider review of the scheme to drive significant further savings.
The Government will also:
- Set out totals for the LCF beyond 2020, providing a basis for electricity investment into the next decade.
- Set out its plans in the Autumn in respect of future CFD allocation rounds.
Secretary Rudd’s defense of the decisions claimed that the UK’s “support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment.”
As regards to the DECC’s claim of a “projected over-allocation of renewable energy subsidies,” the DECC further explained that “the Office for Budget Responsibility’s latest projections show that subsidies raised from bills are currently set to be higher than expected when the schemes under the” Levy Control Framework (LCF) were set up — which is the mechanism by which the total amount of subsidies are capped. The DECC explain that the unexpected increase in subsidies “is due to a number of uncontrollable factors such as lower wholesale electricity prices, higher than expected uptake of the demand-led Feed in Tariffs and the Renewables Obligation (such as solar panels on roofs) and a faster than expected advancement in the efficiency of the technology, meaning renewables are projected to generate more electricity than previously projected.”
Near-Universal Condemnation
The Renewable Obligation (RO) scheme for projects under 5 MW now faces closure in April 2016, a year earlier than had been originally anticipated, which PV-Tech expects could “choke off activity in the large-scale segment after that date.”
Similarly, RenewableUK, the trade association representing the wind, wave, and tidal industries in the UK, has expressed “dismay” at the announcement to change the rules governing the FiT scheme.
“The renewables industry argues that this vital measure, known as “pre-accreditation”, provided certainty to projects while they were being developed, as they could bank on a certain level of support which would not be cut.”
“This announcement is yet another hand brake turn on energy policy. It will cause dismay in Britain’s medium-scale wind energy sector,” said RenewableUK’s Chief Executive, Maria McCaffery. “Removing certainty will worry energy investors and can only increase the cost of developing renewable projects. Government knows this, but is pressing ahead regardless.”
“The Feed-in Tariff is a British success story, but continual rule changes and policy swerves will hurt,” McCaffery continued. “Local communities, farmers and small businesses will be hard hit by today’s announcement, and are being denied their opportunity to generate their own clean power and cut their energy bills.”
The reaction to these announcements have brought no small amount of condemnation. BusinessGreen has summed up a veritable bucketload of defences (from the MP’s involved) and condemnation from everyone else (including opposition MP’s).
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