Department of Energy & Climate Change Win Battle with Treasury

The UK's Department of Energy & Climate Change (DECC) has succeeded in holding cuts to onshore wind subsidies at 10% - winning a battle with the finance ministry, which wanted deeper cuts.

However, DECC has signalled a greater role for natural gas in the UK's energy mix - as reportedly demand by the Treasury - worrying environmental groups who see a weakening of the UK's government's medium-term emissions reduction objectives.

"Renewable energy will create a multi-billion pound boom for the British economy, driving growth and supporting jobs across the country," said Secretary of State for Energy & Climate Change Ed Davey, who claimed that the changes to the Renewable Obligation (RO) rebanding will trigger between £20 billion ($31 billion) and £25 billion of investment into the UK economy over 2013-17.

"The support we're setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues, and shows the key role of renewables for our energy security," he said.

From next year, new onshore wind farms will receive 0.9 Renewable Obligation Certificates (ROCs) for each megawatt hour of power they produce, down from 1 ROC at present. These ROCs, which electricity suppliers are required to buy, are currently worth around £42 each.

Levels of support for offshore wind - at 2 ROCs/MWh - will gradually be reduced as the cost of the technology falls during the decade, while support for certain marine energy technologies will more than double from two to five ROCs per MWh, subject to a 30MW installed capacity limit per generating station.

There will be a new band to support existing coal plants converting to sustainable biomass fuels, which the giant Drax coal-fired power plant says will underpin its shift to become predominantly biomass powered.

There will be no immediate reduction in support for large-scale solar, but there will be a consultation this year on reducing support levels given recent falls in costs, DECC said.

The department said the package is expected to lead to 11 TWh more renewable energy in 2016-17 than under current bandings, and the reforms would ensure that, in 2017, the UK will generate as much as 79 TWh of renewable electricity - almost three-quarters of the 108 TWh of electricity needed to meet the UK's 2020 renewable energy target.

The renewable energy lobby has met today's announcement with relief. "We welcome the government's decision to set its financial support for onshore wind energy at a level that will enable the industry to continue to grow," said RenewableUK chief executive Maria McCaffery.

"Although it has been a long time in coming, the final decision was based on hard economic evidence, and was not derailed by short-term political considerations. We recognise that these are difficult economic times and we have been trying to drive costs down." 

Offshore wind cuts 'carefully phased'

On offshore wind, McCaffery described the planned cuts in ROC levels - to 1.9 ROCs in April 2015, and 1.8 ROCs a year later - as "carefully phased", showing that "the government is committed to the development of the UK's world-leading offshore sector as a key part of our energy mix."

Meanwhile, the CBI, a broader business lobby group, supported the signal from DECC promoting gas. "The government is right that gas should play a crucial role in any future energy mix. We have argued that there is no need for a false choice between renewables, nuclear, gas, and carbon capture and storage," said John Cridland, CBI Director-General. "It's clear from the evidence that we need a diverse supply."

However, environmental groups were less sanguine.

"The [Parliamentary] Committee on Climate Change has made clear that the power sector needs to be nearly carbon free by 2030, and that a new dash-for-gas is neither economically sensible nor compatible with our legal carbon budgets," said Keith Allott, head of climate change at WWF-UK.
"The Treasury is forcing DECC to take a massive gamble that gas prices will come down, on the basis of no credible evidence, while subjecting renewable energy technologies to continual review and uncertainty."

By. Mark Nicholls

Source: Environmental Finance