FollowPublic subsidies for a range of renewable energy technologies are to be cut under plans unveiled by the government on Thursday, as ministers respond to complaints of “green taxes” driving up energy bills.
Power stations using biomass from plants or waste byproducts to generate energy are among the worst losers, with developers disappointed that their subsidy levels have been left at a level they say will not encourage new projects.
Companies generating energy from landfill gas will cease to receive any subsidies at all. Projects to produce energy from waste will have their subsidies slashed, and hydroelectric power will receive only half the subsidy it used to.
Gaynor Hartnell, chief executive of the Renewable Energy Association, said: “If the government wants to encourage a greater contribution from the very cheapest technologies, this is the wrong way to go about it. No new projects have been built since 2009, at the existing levels. Reducing them further cannot help.”
The savings from the subsidy cuts are likely to be small – they could be as little as £400m at the lower end, and no more than £1.3bn.
Chris Huhne, energy and climate change secretary, presented the reforms as a way of “getting more for less”, through cutting consumer energy bills – by an average of £2 per year. He said the government’s job was to ensure the subsidies were high enough to stimulate new green energy generation, but not so high as to encourage profiteering at the expense of bill-payers. “We have carefully studied what the level of subsidy should be, and we have pared them back [where they were] unnecessary, to get a lower level of consumer bills but a higher level of deployment,” he said.
The long-awaited review of renewable energy subsidies came as the solar panel industry braced itself for severe cuts to the feed-in tariffs (Fit) that have stimulated a mini-boom in panel installations in the last 18 months. Treasury officials are understood to be concerned by the success of the Fit scheme, where householders receive a guaranteed income for the power they generate, and want to rein it in.
The tariffs for domestic solar installations are likely to be slashed, greatly reducing their appeal to householders and, the solar industry fears, potentially scaring off investors and costing thousands of jobs.
The Fit scheme, like the renewable obligation, is not paid for from general taxation but by energy companies adding a small amount to all customers’ bills. Ministers are sensitive to a growing clamour in sections of the media attacking high energy bills and blaming “green taxes” for the problem, even though research shows low-carbon subsidies make up only a small fraction of bill rises.
Huhne had little comfort for the fledgling solar industry – although he refused to give details of cuts to the feed-in tariffs, he hinted strongly that they were to come, noting that the costs of photovoltaic technology had been falling by about 6% a year. “If suddenly there is a dramatic reduction in costs, it is appropriate that we should be looking at the energy bill payer and the taxpayer, and getting value for money,” he said.
Huhne has tried to make the case that investing in green energy will cut bills in the medium term, because soaring and volatile fossil fuel prices are the main cause for increasing energy bills. However, he is up against stiff opposition within the government.
Green campaigners and the renewables industry were relieved, however, that the cuts announced on Thursday were not much worse, as many had feared.
Doug Parr from Greenpeace said: “Despite some prominent Tory scepticism over the role renewables can play in delivering clean and secure energy, it’s a relief to see the doubters have lost this internal battle and incentives are being left in place to spark an expansion of green energy generation. David Cameron can build on this decision and show real leadership by now making the UK the world leader in marine renewables technologies, in the process providing new jobs and building economic growth.”
Under the new plans set out on Thursday, windfarms escaped relatively lightly. Onshore windfarms will have their subsidies cut, but only gradually by 10%, while offshore windfarms will be granted a breathing space until 2015, after which their support will be reduced by 5% in successive years.
Hartnell said: “Onshore wind developers should be able to live with this. It’s a modest reduction, but it will have an impact on smaller and community schemes. Offshore wind remains at the higher level introduced by the emergency review, which is welcome news.”
There were also a few clear winners – chiefly tidal and wave energy, which will receive five renewable obligation certificates for each megawatt (MW) on smaller schemes. However, bigger installations – above 30MW – will receive only two. Renewable obligation certificates are the means by which low-carbon energy is subsidised – energy companies buy them from developers to fulfil their legal obligations to generate green power.
Tim Cornelius, chief executive of Atlantis Resources Corporation, said: “This decision should provide the necessary economic stimulus to catalyse the next phase of growth in the UK marine energy sector. Technology developers and their project partners are preparing for commercial-scale deployment and this support will prime investment and create jobs. The industry can now proceed with confidence. Tidal energy has a major role to play in the UK’s future energy mix.”
Now that the government has laid out its plans, investors are expected to review their business plans and some that were put on hold may now be brought forward.
“There is great relief that this document has finally been published. The delay had put billions of pounds worth of investment on hold. Developers will need to see these new numbers in legislation before they can resume development activity, however. We welcome the broad thrust of the proposals, although we have views on some of the details, which we’ll feed in to the consultation,” said Hartnell.
Arnaud Bouillé, director at Ernst & Young’s environmental finance team, said: “With GDP growth forecast close to zero and much debate about affordability and increasing energy bills, today’s announcement of a cut in the support of both onshore wind and solar energy generation is not totally unexpected. The biggest loser will be the solar sector which is receiving its second setback in its short-lived UK history. This may be a missed opportunity for a maturing industry which had achieved significant cost reductions in recent years and demonstrated job creation benefits at a local level.”
Commenting on the collapse on Wednesday of talks between government and a consortium of companies to build a pioneering carbon capture and storage (CCS) plant in Scotland, Huhne blamed the withdrawal of the Longannet CCS demonstration plant on the specific conditions of that project, which could not be made economically viable. He said he was “confident we can deliver CCS elsewhere within the budget [of £1bn in public subsidy] and we have undimmed determination – CCS is a massive industry opportunity”. DECC officials pointed to half a dozen other potential CCS demonstration plants, including one at Peterhead in Scotland proposed by Scottish and Southern Energy.
Source: guardian
