Engineering news
The government has announced a string of cost-saving cuts on subsidies that support the renewable energy industry, prompting concerns about investor confidence in large-scale projects.
Energy and climate change secretary Amber Rudd has confirmed a reform of the financial support provided to the biomass and solar industry as well as a shake-up of the Feed-in Tariff scheme.
Financial support for renewable technologies primarily comes in the form of subsidies which are paid for through energy bills. The total amount of subsidies available is capped by the Levy Control Framework (LCF).
However, the Office for Budget Responsibility’s latest projections show that subsidies raised from bills are currently set to be higher than expected when the schemes under the LCF were set up. They said this is due to a number of “uncontrollable factors” such as lower wholesale electricity prices, higher than expected uptake of the demand-led Feed in Tariffs and the Renewables Obligation (such as solar panels on roofs) and a faster than expected advancement in the efficiency of the technology, meaning renewables are projected to generate more electricity than previously predicted.
Rudd said the cuts have been introduced to deal with the “projected over-allocation of renewable energy subsidies”, adding that the measures will provide better control over spending and ensure bill payers get the “best possible deal as we continue to a low-carbon economy”.
She said: “Our support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment”.
The measures include removing the guaranteed level of subsidy for biomass conversions and co-firing projects for the duration of the Renewable Obligation (RO), known as “grandfathering” - the guarantee that a certain level of subsidy will be provided throughout the lifetime of a solar farm once built. The government claims this could reduce the risk of more allocations under the LCF by around £500m per annum in 2020/21.
There will also be a consultation launched into controlling subsidies for solar PV of 5MW and below under the RO. This includes consulting on early closure and removing the guaranteed level of subsidy for the duration of the RO. A consultation on changes to the preliminary accreditation rules under the Feed-in Tariff (FIT) scheme followed by a wider review of the scheme will be introduced to drive “significant further savings”.
The government will also set out totals for the LCF beyond 2020, providing a basis for electricity investment into the next decade and set out its plans in the Autumn for the future Contracts for Difference (CFD) allocation rounds.
The Solar Trade Associate (STA) has said the government measures are a “real blow" to investor confidence, damaging for big solar rooftops and solar farms, and calls for a “bridging strategy” between the industry and the Department for Energy and Climate Change (DECC).
Leonie Greene, the STA's head of external affairs, highlighted that there had been no pledge in the Conservative manifesto about cutting support for solar. She said: "We recognise that government wants to shift the emphasis to larger solar rooftops, but we have explained to the DECC that these are just 5% of the UK market. More work is needed urgently to unlock larger solar roofs.
"There is a danger 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.”
STA also said the move to cut subsidies was regrettable as solar farms are “close to competitiveness” with new gas generation and account for a very small proportion of expenditure on the Renewables Obligation (6%), costing just £3 per year on each household bill.
Daisy Sands, Greenpeace head of energy campaign, said: "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 exists.”