George Osborne has been accused of attempting to appease rebellious Tory backbenchers by holding up an announcement of new subsidies for onshore wind projects.
Ed Davey, the Energy and Climate Change Secretary, had been due to announce a new level of Government support for wind turbines today when he appeared before Parliament.
Mr Davey is understood favouring cutting subsidies by around 10 per cent – a level recommended by the Government’s own review into renewable energy,
But the measure is being blocked by Mr Osborne who is demanding far greater cuts before signing off on the new strategy.
Critics claim that the Treasury’s intransigence is putting off investment in renewables and could even result in higher bills for consumers.
The Government is legally committed to producing 15 per cent of the country’s energy needs from renewable sources by 2020.
At present onshore wind is the most economically viable of the all renewable energy sources in the UK.
Industry sources fear that if subsidies are slashed the Government will be forced to spend more to produce offshore wind - pushing up bills.
If the scheme is left unchanged the government would spend between £250m and £280m a year by 2016-17 to support onshore wind, according to government documents.
A cut of 10 per cent would reduce this to between £170m and £220m while a deeper cut – as proposed by the Treasury – would save even more money.
The falls are designed to reflect the relatively low and dropping cost of onshore wind generation, a more mature technology
However, subsidies for offshore wind, biomass and wave power are set to rise under Decc proposals.
The department’s own figures suggest that offshore wind typically requires double the subsidy of onshore wind.
Giving evidence to the Energy Select Committee Mr Davey could only confirm that the Government would make its decision “as soon as possible”.
But in what will be seen as a swipe at Mr Osborne he added: “I think the British Government has to be seen to act on evidence and not political pressure. Britain has a very proud record of making decisions based on the evidence. If that were not the case the cost of capital to investors (in Britain) increases.”
Industry sources went further suggesting Mr Osborne was putting the concerns of his MPs in ahead of the wider national interest.
“It is ludicrous that 100 back bench MPs have significant influence on the country’s future energy infrastructure.
“This delay risks damaging investment in renewables and is frankly incomprehensible.”
Maria McCaffery, Chief Executive of RenewableUK, called on the Government to reach an agreement on the rate of subsidy as quickly as possible.
“The economic evidence is crystal clear – it shows that there is no case for cutting support for onshore wind beyond the 10 per cent originally proposed and consulted upon in the Government’s own review.
“Any further delay in an announcement could have a devastating impact on investor confidence, job creation and the deployment of clean energy. It would be unacceptable if the decision were to be delayed until September – especially as the new banding levels are due to come into force just seven months later, in April 2013. It is imperative that investment and job creation are not harmed in one of our key growth sectors. The industry is demanding clarity at the earliest possible opportunity as a matter of urgency”.Reuse content