Offshore wind farms to get more cash
Thursday 20 October 2011
Offshore wind farms are set to receive more subsidies than previously planned in the next few years under proposals from the Government today.
Under the plans, smaller-scale wave and tidal stream projects, which harness the flow of the tide, would receive many times more support than other types of renewable energy in a bid to encourage those technologies.
While the amount of support to offshore wind will decline over the next five years, it will be cut less than had been planned, under the proposals put out for consultation today.
Other technologies, including anaerobic digestion, geothermal, hydroelectric, energy from waste, onshore wind and microgeneration will see the level of support decline.
Green electricity receives support though the renewables obligation (RO), under which suppliers have to show they have sourced a certain proportion of power from renewables.
Different credit is awarded to different types of power, and today's consultation contains proposals for the levels of credit set for each technology up to 2016/17.
The Government said the new plans would cost between £400 million and £1.3 billion less than retaining the current levels of support for renewables, so that by 2016 they account for £50 on the average electricity bill, compared with £52 per household under the existing scheme.
Deputy Prime Minister Nick Clegg said: "Investing in green energy boosts growth and creates jobs - the offshore wind sector alone could provide up to 60,000 jobs in this country by 2020.
"Supporting clean, green, secure energy is the right thing to do for both the environment and the economy.
"Today's announcement makes clear the Government's commitment to supporting long-term investment in the UK's renewables industries."
Energy and Climate Change Secretary Chris Huhne said: "We have studied how much subsidy different technologies need.
"Where new technologies desperately need help to reach the market, such as wave and tidal, we're increasing support. But where market costs have come down or will come down, we're reducing the subsidy."
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 renewable technologies, in the process providing new jobs and building economic growth."
Wind, wave and tidal industry body RenewableUK responded cautiously to today's announcement.
Director of policy Gordon Edge said the large boost in subsidy for wave and tidal projects up to 30MW - around the same capacity as 10 offshore wind turbines - was a "major win".
But cutting support for onshore wind farms would hit the number of projects getting built, particularly smaller, community schemes, with RenewableUK estimating there could be potential losses to local areas of £1.5 billion over the lifetime of schemes.
Dr Edge said the level of subsidy for offshore wind would be maintained for an extra year and then decline, although by less than previously planned.
He said the reduction in support would be challenging as companies tried to reduce costs at the same time as developing deeper water sites.
"We weren't quite expecting a banding down for offshore wind, but at least one that's spread and stepped is better."
He said maintaining the current level of support for offshore wind for an extra year up to 2014/15 was helpful.
But he added that the industry saw scope for cutting costs after 2017 and before that there was a need to build up volume in the sector.
RenewableUK's chief executive Maria McCaffrey warned: "Any reduction in financial support will have an impact on the industry, reducing deployment and potentially jeopardising momentum as we strive to reach our carbon reduction targets."
But she recognised the need to drive down costs, especially offshore.
Mark Hanafin, managing director at Centrica Energy, said: "The proposal to reduce the support mechanism for offshore wind and other technologies means we need to re-examine the economics of the projects we have in our planning pipeline, including our next two offshore wind projects which could bring the UK a further 1GW of renewable capacity."
But Friends of the Earth's energy campaigner Paul Steedman said: "After months of uncertainty, this announcement should encourage investors to reap the UK's huge wind and wave potential and help wean the nation off its costly fossil fuel addiction.
He added: "But continued support for planet-wrecking biofuels and funding cuts for onshore wind schemes casts a dark shadow over the Government's commitment to clean British energy."
Nick Molho, head of energy policy at WWF-UK, said: "Providing stable and long-term investment certainty to the renewables sector is crucial for allowing large-scale deployment of renewable energy.
"It's also key to reducing the costs of those technologies as fast as possible, which is good for consumers, and creating new jobs in the renewable energy manufacturing sector, which would be good for the economy."
He added: "The Government needs to finalise this review as soon as possible and ensure that the levels of support that are agreed will not constantly be re-visited in the years to come.
"If this were to be the case, it would seriously undermine investment certainty in the UK's renewables sector and will result in the UK missing the boat in becoming a leader in manufacturing renewable technologies."
Mr Huhne said the changes outlined today to the levels of support, which are funded by additions to consumer energy bills, would provide a "better bang for the bill-payer's buck".
He said: "We're getting more renewables for less amount of money. That seems to be the right direction to be going in.
"The key point with renewables is that it's domestically-produced energy which allows us to get off an excessive reliance on fossil fuel prices set in volatile parts of the world."
He said there had been a 40% increase in gas prices on last year for delivery this winter, and the more electricity that can be produced from renewables and nuclear power, the more likely it was that consumers could be protected from the volatility of fossil fuel prices.
Energy Minister Charles Hendry said recent rises in the price of wholesale gas, blamed for the latest energy bill rises by the big six power companies, "totally dwarfs" the cost of the renewables obligation.
He added that the burden on energy bills caused by green policies, which have been blamed in some quarters for the rises currently being seen, was "woefully exaggerated".
Earlier this week analysis by Friends of the Earth suggested that sticking with fossil fuels to generate electricity, rather than pushing ahead to meet targets for renewables, could end up costing consumers £300 on their bills by 2020.
Caroline Flint, shadow energy and climate change secretary, said: "After months of delay the Government has finally got round to publishing its plan for support for renewable energy.
"With the economy flatlining and the Government failing to get tough on the energy companies to cut people's bills, today's announcement of a cut in the support of both onshore wind and solar energy generation is deeply disappointing if not unexpected.
"Under this Tory-led Government the UK has dropped from 3rd to 13th for investment in green growth in the last year, put billions of pounds of investment on hold and threatened jobs and industry in this country.
"The UK should be at the forefront of developing new renewable energy."
Mr Huhne also indicated the Government could reduce the subsidies for solar power paid under the "feed-in tariffs" scheme which pays people for the electricity they generate from small-scale renewables.
Amid speculation the Government is planning to slash feed-in tariffs for solar photovoltaics (PV), Mr Huhne pointed to the falling costs of the technology and said "we have to make sure the support we're giving to technologies is in line with the real world".
Under the proposals put out today the cost of supporting renewables on the average household electricity bill will rise from £20 this year to £50 in 2016, slightly less than the £52 projected if the current system was continued.
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