Government applauded over £40bn renewable energy support plans

by Search Gate staff. Published Wed 04 Dec 2013 11:58, Last updated: 2013-12-04
DECC delivers long-term investor confidence

The Government has been supported today for revising the subsidy framework it provides for the UK's renewable energy industry.

The long-term plan is expected to deliver £40 billion of investments in renewable electricity generation projects up to 2020, following the updated contract terms and strike prices published today.

Sixteen renewable generation projects also reached the next stage of Final Investment Decision Enabling for Renewables (FIDeR) process today, which could be supported either through investment contracts or the enduring Contracts for Difference (CfD) regime.

There is currently over 20GW of renewables capacity operational in the UK – a figure that could double by 2020 as a result of the Government’s reforms. The UK has a healthy pipeline in key technologies, with a total of almost 11GW of offshore and onshore wind with planning consent and awaiting construction. And if all the 8GW of projects which are proceeding under FIDeR are built through investment contracts or under the enduring CfD regime they could contribute around 30% of the new renewables generation the country needs by 2020.

The UK is now on track to meet that target, and will have doubled the amount of electricity generated from renewables from 15 per cent to over 30 per cent by 2020.

RenewableUK today welcomed the publication of the details within the National Infrastructure Plan 2013, which confirms the levels of financial support for onshore and offshore wind between 2015 and 2019.

The reduction in financial support for offshore wind is less steep than had been suggested in the draft strike prices which were published in the summer – for the financial year 2018/19, the level of support has been increased by £5 per megawatt hour, from £135/MWh to £140/MWh.

Financial support for onshore wind has been reduced by £5/MWh from 2015 onwards compared to the draft strike prices, e.g. £100/MWh in 2015/16 has fallen to £95/MWh, and £95/MWh in 2017/18 has dropped to £90/MWh.

RenewableUK’s Deputy Chief Executive Maf Smith said: “We welcome the fact that the Government has heeded the wind industry’s call for a more realistic level of financial support for offshore wind. It sends an important political signal that the Government recognises the need to back this sector, if we are to attract big wind turbine manufacturers to the UK to open up factories creating tens of thousands of jobs.

"The Chief Secretary to the Treasury Danny Alexander said today he wants at least 10 gigawatts of offshore wind installed by 2020, trebling current capacity. Industry can deliver this and more.

“Obviously any reduction in support for onshore wind is unwelcome, and the Government had promised that any drop would be based purely on economic evidence. Onshore wind is the most cost-effective form of renewable energy we have, so if we want to keep energy bills as low as possible, we need to ensure the level of support is right.

"Our challenge to Government is that it must work with industry to help us to reduce costs and support the right projects. The reduction means that some smaller projects such as community- led schemes will be lost.

“If this cut has been made for political reasons rather than economic ones that would be a worry. All politicians need to understand that uncertainty spooks investors and it is the consumer who bears that cost. Voters support the development of on and offshore wind, so we now need a period of calm and consistency from Government.”

Energy makes up 58 per cent of the total infrastructure pipeline in Government’s National Infrastructure Plan. Investment in renewables, new nuclear and gas is required to replace between 10 and 12 per cent of current power generating capacity, which is due to close over the coming decade.

The updated contract terms and strike prices is aimed to help to build a low-carbon energy mix to keep the lights on, reduce emissions and bring green jobs and growth to the UK.

The additional investment will generate enough clean power for 10 million homes, and reduce carbon dioxide emissions by over 20 million tonnes.

Increasing the amount of home-grown renewable energy will boost energy security, reduce reliance on imported fossil fuels, and support up to 200,000 jobs by 2020.

In total, these reforms will help to support up to £110 billion of additional investment across the electricity sector by 2020, helping to insulate Britain from future world gas price increases and boosting jobs and growth in every region of the UK.

Energy Secretary Ed Davy said: “This package will deliver record levels of investment in green energy by 2020. Our reforms are succeeding in attracting investors from around the world so Britain can replace our ageing power station and keep the lights on.

“Investors are queuing up to express their interest in these contracts. This shows that we are providing the certainty they need, our reforms are working and we are delivering ahead of schedule and to plan.

“With sixteen new major renewable projects progressing in our “go early” stage we are delivering ahead of schedule and are able to begin the move to the worlds first low carbon electricity market faster than expected.”

The Government claims today's strike prices and contracts give energy generators a sound, sustainable and long-term basis to invest in renewable energy and reinforce the UK’s position as one of the world’s leading renewables markets, and the number one place for business to invest in offshore wind generation.

Greenpeace Policy Director Doug Parr said: “Today’s cuts to onshore wind and solar support schemes show how quickly the cost of clean energy technologies are falling. Onshore wind farms will power our homes and factories more cheaply than new nuclear stations, and the same is expected of solar.

"Given the increasing affordability of these renewable energy sources, it’s right Ministers should now put emphasis onto helping drive down the cost of offshore wind so that the UK can reap the rewards of new turbine factories and thousands of new jobs.”

Nick Molho, head of climate and energy policy at WWF-UK, said: "We support the idea that a successful subsidy regime is one that goes down in cost over time as technologies mature, but it's critical for investment stability that any revision to the level of support given to renewables is based on economic evidence.

"With respect to offshore wind, we welcome the Government's recognition that the sector needs early support to attract the levels of investment needed to cut its costs in the long term, make a significant contribution to our energy security and create promising growth opportunities. But going forward, what the offshore wind sector and the renewables industry as a whole need more than anything is long-term policy stability."

And Friends of the Earth Energy Campaigner Simon Bullock said: “The cost of producing clean energy from onshore wind and solar is becoming cheaper all the time, so cutting Government support for these technologies simply reflects their success.

“The extra support for offshore wind is a welcome boost and will lead to more jobs and investment.

“Onshore wind is already less expensive than nuclear, and solar will be cheaper by the time new reactors come on line.

“Ministers must now scrutinise the hand-outs given to support oil, gas and coal - George Osborne has given £2 billion to support dirty energy in the past year alone, and more is expected in the Autumn Statement.”

Industry commentator David Ferris, who leads the Energy & Utilities team at law firm Osborne Clarke, said: “At first glance, it would be easy to say ‘this is going to affect onshore wind and solar massively’. Some of the media this morning certainly seemed to go with that line. But the devil’s in the detail, and the information being released shows the changes are more in line with the accepted and continuing movement towards tapering off of subsidy levels as technology matures and costs reduce, reflecting the strength and maturity of the UK onshore renewables industry.”

“If we’re not careful, we’ll lose sight of the really important detail here: this only affects future onshore solar and wind projects that are over 5MW and are not yet accredited. In short, there’s lots of great renewables projects that this simply doesn’t affect.”

ORE Catapult CEO Andrew Jamieson said: "We welcome the Government's announcement of additional financial support for the development of offshore wind energy generation, in recognition of both the challenges that it faces and the opportunity that it brings.

"It is now imperative for industry and academia to work collaboratively with government to bring innovation to the market, to develop consistent standards and improve reliability, and to drive down the long-term cost of offshore renewable energy.

"That is how the UK will realise the huge potential economic, social and environmental benefits that this industry can provide."

And Huub den Rooijen, Head of Offshore Wind at The Crown Estate, commented: “This is an important step for the industry and a resounding signal of the Government’s commitment to ensuring offshore wind continues to make a substantial contribution to the UK’s energy mix. We will continue to work with all developers to get projects built."

DECC believes today's renewed focus on renewables will support the growth of the offshore wind industry, with modelling showing that deployment of 10GW by 2020 is achievable, in line with the previously stated range of 8-16GW. This is not a target and actual deployment will depend on technology costs.

Given the approach set out in the recent European Commission guidance, it is expected that the new state aid guidelines will require the UK to move to competition for more established technologies. The Government will confirm its approach and details of how this will operate through the Delivery Plan and engagement with stakeholders early in 2014.

The contracts will be delivered from within the Levy Control Framework, and is consistent with the plans announced this week reducing the average household bill by £50 a year by early 2014.

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