Industry reacts with shock and anger to renewable energy subsidy cuts

by Search Gate staff. Published Wed 22 Jul 2015 10:24, Last updated: 2015-07-22
More storm clouds ahead for threatened renewable energy sector
More storm clouds ahead for threatened renewable energy sector

Industry leaders and campaigners have reacted with shock and anger at Government plans to overhaul subsidy support for the renewable energy industry with a series of cuts and rule changes.

RenewableUK, the trade association representing the wind, wave and tidal energy industries, has expressed dismay at the announcement by Energy Secretary Amber Rudd of fresh retrospective changes in the levels of financial support for clean energy.

The Minister has announced that the Government intends to change the rules governing the Feed-In Tariff, so that the level of financial support for medium-scale onshore wind projects can no longer be guaranteed in advance.

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. Ms Rudd also announced a wider review of the Feed-in Tariff which also supports small-scale renewables.

RenewableUK’s Chief Executive, Maria McCaffery said “This announcement is yet another hand brake turn on energy policy. It will cause dismay in Britain’s medium-scale wind energy sector. 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. 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 renewable energy industry is ahead of the Government in its desire to bring down costs - these have fallen dramatically and will continue to plummet. Onshore wind is already cheaper than new nuclear power and is on course to be cheaper than new gas by 2020. Offshore wind costs have fallen by 11% in the past 5 years.

“We need the industry and Government to agree on a long term strategy with financial support being reduced gradually and appropriately over a clearly set out timescale – not short-term changes coming out of thin air.”

RenewableUK also argues that the Government is trying to justify its changes by citing statistics which over-estimate the amount of financial support needed for renewable energy under the Levy Control Framework. Ministers are quoting the OBR’s Economic and Fiscal Outlook, which published estimates on the costs of all environmental levies earlier this month, but did not explain its methodology.

Maria McCaffery commented: “If investors are to have confidence in forecasts then the Government needs to show its workings. Industry is committed to delivering much-needed low-cost carbon energy within the available budget and the Committee on Climate Change agrees that there is enough funding in the Levy Control Framework to meet our renewable energy targets, so Government needs to be clear about its own calculations as well as how many renewable projects it expects to connect between now and 2020”

The Department of Energy and Climate Change today also published proposals to reduce Renewables Obligation support for solar on both roofs and in solar farms.

The proposals cover both the Renewables Obligation for bigger projects, and changes to rules on the Feed-in Tariff for smaller projects.

The Renewables Obligation, which currently supports rooftop and solar farm projects between 1MW and 5MW in size, is according to these plans set out today to be closed from 1 April 2017, as well as a planned reduction in levels of support for projects currently in the pipeline.

Critically, DECC is also proposing to end ‘grandfathering’ within the scheme from now on, the guarantee that a certain level of subsidy will be provided throughout the lifetime of a solar farm once built.

This follows a similar move last year which already excluded solar farms of more than 5MW in size – about 25 acres – from receiving support from the scheme as of 1 April 2015.

The Solar Trade Association’s Head of External Affairs Leonie Greene commented: “This is damaging for big solar rooftops as well as solar farms, both very cost-effective ways of generating solar power. This contrasts with repeated commitments from Government to boost the commercial solar rooftop market.”

“The possible removal going forwards of the guarantee on a set level of support throughout a project’s lifetime once built is a real blow to investor confidence.”

“There is no pledge in the Conservative manifesto about cutting support for solar, so we are disappointed by this move. Solar is the nation’s most popular form of energy, as the government’s own opinion polls have shown.”

"We recognise that Government wants to shift the emphasis to larger solar rooftops, but we have explained to the Department that these are just 5% of the UK market. More work is needed urgently to unlock larger solar roofs.

“There is a danger that if Government pulls the rug on solar farms too early, the market will have nowhere to go. This could be further compounded by changes to the Contracts for Difference auctions. What we need is a bridging strategy and we are very keen to work with DECC to achieve that.”

"We also regret this move because solar farms are close to competitiveness with new gas generation and they account for a very small proportion of expenditure on the Renewables Obligation. We're hearing a lot of big figures from Government, but they should know it is just a few quid more on energy bills to deliver nothing less than a solar power revolution in the UK.

“We think the British public would support that. We're very close, but we're not there yet. Support for solar under the Renewables Obligation currently costs just £3 per year on each household bill, and solar on makes up only 6% of the Renewables Obligation budget."

The grace periods put forward for projects currently in pipeline is similar to that for the previous closure.

With regards to the Feed-in Tariff, which supports small-scale rooftop and solar farms, the proposal is to remove ‘pre-accreditation’ to a fixed tariff level, meaning that complex community and commercial projects that can take longer to complete could have to deal with constantly reducing tariff levels between the start and finish of the project.

The Solar Trade Association’s Head of External Affairs Leonie Greene commented: “Again, the removal of the ability to pre-accredit a project and lock in at a set level of support, will make it harder to do both commercial rooftop and community solar schemes. We understood that DECC wants to support growth in these areas so we’ll be asking them to think again.

“However it is important to note that this is not an issue for residential or domestic solar on people’s homes – these are quick to install and do not depend on pre-accreditation.”

The Government has also committed to give visibility with regards its low carbon energy budget as a whole, the Levy Control Framework, beyond 2020 and to set out its plans Contracts for Difference, its new subsidy support scheme, in the autumn.

This follows the Solar Trade Association’s publication last month of its ‘Solar Independence Plan for Britain’ report, a fully costed proposal which sets out how the government can double the amount of solar and get solar as cheap as fossil fuel electricity by 2020, all for a modest amount of extra funds.

Chief Executive of the Anaerobic Digestion & Bioresources Association, Charlotte Morton, commented: “FIT pre accreditation is vital for the ongoing success of the anaerobic digestion sector. Even smaller AD projects are relatively complex, and take over a year to develop - pre accreditation helps to make the development risk acceptable to funders.

“Tariffs for AD are already being reduced, and deployment is falling as a result - so this change is unnecessary from a cost control perspective. The industry's long development times mean these changes would move the goalposts after the game has kicked off for projects in progress, which will have a severe impact on investor confidence.

“With support, AD can deliver cost effective greenhouse gas savings - potentially as high as 4% across the economy as a whole - and grow a UK supply chain which helps deliver economic productivity and exports. These proposals put that potential at risk, preventing the development of the very technologies that will lower consumer bills in the long term.

“How will the government be able to maintain rhetoric on meaningful climate change commitments at December’s Paris conference, while hitting our green economy at home?”

Michael Grubb, Professor of International Energy and Climate Change Policy at University College London, says that announcements on renewable energy by the Government over the past few weeks were retrospective changes that inject uncertainty and drive away investment in the energy sector.

Professor Grubb was commenting on new proposals announced today on cutting support for renewable energy. He said: “The entire energy industry is now concerned about the risk of a capricious and politicised UK energy policy, driven more by Treasury intervention than by the Department responsible.”

He said: “The falling costs of both renewables and gas create the ideal opportunity to build a modern energy system that combines both at scale without driving up overall energy bills from present levels. The major risk for the energy sector is uncertainty and instability sharply driving up the cost of doing business in UK energy. Stability cannot be delivered by ignoring the realities of climate change, the global Paris negotiations, or existing legal commitments on renewables and the UK carbon budgets.

Professor Grubb said that the renewables industry is “being penalised for success”. He said that the installed solar energy capacity has grown to five times the level projected, at half the cost per unit, and wind turbines have been producing more than expected; both increase the volume of renewable energy receiving subsidies. At the same time, the Treasury’s earlier decision to freeze the carbon floor price, the subsidies to conventional power through the capacity mechanism, and the falling gas price have all combined to increase the bridge that the renewable subsidies have to span.

He said: “This is a pivotal moment in UK energy policy, on which it is beginning to look like the UK has two Governments. One is that pressing for strong international action on climate change, which signed an unambiguous cross-party pledge to phase out unabated coal, reiterated its carbon targets and which committed in its manifesto to deliver clean renewable energy as cost-effectively as possible.

“The other is a Government which has moved to prematurely end supports for the cheapest of the UK’s main renewable resources, which has injected fear and uncertainty into renewable energy investors – and which seems set to also scrap energy efficiency programmes which have helped to cut consumer bills and avoided the need for billions of pounds of new fossil fuel investments.

“Sooner rather than later David Cameron must clarify which Government he is really leading.”

Former Shell Chairman Lord Oxburgh of Liverpool agreed that constant changes to policy increased costs. He said: “The changes that the Government is announcing in the name of affordability will have the perverse effect of increasing the cost of clean energy. Constant changes to energy policy undermine investor confidence and increase the cost of capital for renewable energy projects.

“At a time when North Sea oil and gas is in terminal decline, we should remember that it took consistent Government support to get that industry off the ground. If we’re serious about building a new, clean energy industry in the UK, including our unique offshore wind resource in the North Sea, that also needs stable, long-term support from Government.”

Friends of the Earth energy campaigner Alasdair Cameron said: “This latest attack on the green economy will cast a long shadow over the UK solar industry, and undermine efforts to tackle climate change.

“This won't lower electricity bills - all new energy is being subsidised to some extent and solar is already cheaper than nuclear and will soon be cheaper than gas from new power stations.

“This is entirely a problem of the Government’s creation. The Treasury has placed arbitrary limits on clean power, but solar has proved too popular and efficient, and the Government seems to lack the imagination to adapt.

“If David Cameron wants to have any credibility ahead of this year’s crucial climate talks, he must end his support for dirty fossil fuels, such as fracking, and stop his government destroying the UK’s burgeoning renewable sector.”

However, Friends of the Earth welcomed news that curbs were being placed on converting large coal plants to burn biomass, wood fuel.

“We welcome Government moves to stop some forms of biomass from getting support,” Cameron added. “Burning wood for fuel can be worse than burning coal, and energy sources that cannot show significant carbon reductions shouldn’t get support.”

Daisy Sands, Greenpeace Head of Energy campaign added: "The government is set on destabilising the booming but young solar industry. If the proposals to the consultation are implemented the government will be choosing to protect subsidies to EDF whilst withdrawing support for the communities, businesses and households’ efforts to install solar panels.

“No-one should be getting easy money at a time of financial stress, but this is a moment where a huge opportunity to deliver subsidy free clean energy exist.

“Cutting the subsidies now will see businesses go bust and investment dry up. The timing couldn't be worse as the sector is on transition to subsidy free and is cheap form of renewable energy. It is galling when tax breaks and subsidies have propped up the oil, gas and nuclear industries for decades.

“Jobs will go and emissions will stay higher at a time when policies and funding should be in place to ensure that people can participate in contributing to the UK’s diverse energy mix.”

Kerri Ashworth, legal director at law firm TLT, commented: “The latest raft of announcements are wide-reaching and another hammer blow to the renewables sector.

"The proposed changes remove the very principles designed to promote deployment of and investment in renewable energy projects, impacting developers, investors and lenders alike.

“With a wider review of the Feed-In Tariff scheme already underway, the sector should perhaps remain braced for further bad news.”

Paul McCullagh, CEO of UrbanWind, said: “This continued withdrawal of support for renewable technologies is a complete backwards step in our transition towards a low carbon economy.

“Amber Rudd has previously stated her commitment to securing a binding decarbonisation agreement at the United Nations Climate Change Summit in Paris later this year. However, she has since then continued to withdraw support for onshore wind and solar, undermining an industry that is both one of our cleanest and readily-deployable options and one that enjoys widespread public support.

"I would like to see her show her colours by truly demonstrating her green credentials.

“While it is true that onshore wind is capable of reaching grid parity with other sources of renewables by 2020, and is even likely to be a cheaper method of generation than competitors by that point, we will not reach that watershed if the rug continues to be pulled out from under our feet.

“The onshore wind industry needs support from the Government to ensure that this crucial technology is able to complete its transition into a leading source of energy in the UK. Onshore wind has already clearly demonstrated the impact it is capable of having, particularly in Scotland, but to continue to withdraw support prematurely puts all of that progress at risk.

“It is crucial the Government demonstrates a commitment to onshore wind and the role it can play in generating plentiful, low-cost and green energy. By providing support in the form of a renewed commitment to the Feed-In Tariff and supporting wind projects in the planning process, they can ensure that onshore wind plays a key role in attaining our carbon reduction commitments and keeping the lights on.”

Juliet Davenport, chief executive renewable electricity company Good Energy, said: “Ending support for solar power makes no sense at all. On one hand the government says it wants to keep household energy bills down by removing support for clean solar power, yet on the other promises massive subsidies to nuclear.
The energy market currently has a wide range of subsidies and tax allowances in place, across all the technologies – renewables, nuclear and gas - and not all of these are transparent when it comes to the consumer.

"We’d like to see the government looking at all forms of support, not just renewables, and creating a more transparent and fair regime across the whole market.

"Our research shows that solar reduces wholesale prices by displacing high cost gas fired power generation during the day - the government is taking a one-sided approach by not taking this into account.
Solar power met 15% of UK’s energy demand on the afternoon of Friday 3 July. With continued support from the Government over the next 5 years, solar would soon be one of the cheapest forms of electricity generation.

"Killing support for solar means that schools, farms, homes and indeed whole communities will find it much tougher to generate their own clean, local electricity and will be reliant on the same old-fashioned utility companies that they should be moving away from.

"We’re also worried about the knock-on effect this could have on innovation in the battery storage market, which is led by solar. Stifling support could bring an end to a truly game-changing technology which would enable households to store their own electricity.”

The Chair of Parliament's Energy and Climate Change Committee, Angus Macneil MP, commented: “I am disappointed that the Government has made these announcements after the House of Commons has risen for the summer recess, as proper scrutiny in Parliament will now not be possible until after the consultation deadlines.

“The measures announced by the Department of Energy and Climate Change today raise more alarming questions for investors in low carbon, renewable technologies who are already struggling to finance projects after a series of sudden policy changes. The latest changes remove the current certainty for the lowest cost renewable technologies whilst failing to provide any indication of the future investment landscape.

"DECC has stated that it will set out totals for the Levy Control Framework beyond 2020 but has given no indication of when it will provide this information leaving industry in limbo.

“Energy developers seeking support under the Contracts for Difference will now be left waiting for DECC to announce its plans for future CfD allocations. It is important that value for money is at heart of decision making on energy, but removing this certainty today actually risks raising the cost of capital and thus slowing down the steep cost-reduction pathway of technologies that will be needed in the next decade.

"Removing support for the lowest cost renewable technologies calls into question once more the Government's commitment to meeting out medium- and long-term decarbonisation targets, sending out a worrying signal in the run up to the Paris climate change conference.”

Chief Executive of the Renewable Energy Association, Nina Skorupska, said: “The industry is at a critical point as it seeks to reach grid-parity as quickly as possible yet retain the size and scale necessary to become a key contributor to the UK economy.

"We will be working with Government to ensure that the sector remains of a sufficient size, capable of delivering cheap, low carbon electricity up to 2020 and beyond.”

Keith Taylor, Green MEP for South East England, said:"Amber Rudd's incoherence in blindly supporting nuclear subsidies whilst cutting renewable funding is breathtaking. Nuclear has an expensive history the government seems incapable of learning lessons from, while renewables offer sustainable cleaner energy with thousands of jobs.

"In the face of our commitments to reduce carbon emissions and the forthcoming UN climate talks in Paris, these cuts are environmental vandalism of the first order."

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Comments about Industry reacts with shock and anger to renewable energy subsidy cuts

We know they are idiots.Is it possible for ordinary folk to come together and fund? Crowdfunding? Best charity/social enterprise to support?
Gemma Armes, London around 3 weeks, 6 days ago

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