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UK May Rue Decision To Cut Renewables Subsidies

British Energy Secretary Amber Rudd says there’s no “magic money tree” to finance subsidies for renewable energy, but now the kingdom’s Conservative government is finding that prestigious energy ratings aren’t easy to come by, either.

The World Energy Council (WEC), the U.N.-accredited agency based in London, said Wednesday that it had downgraded Britain from the top AAA rating to AAB in its Energy Trilemma Index. The ranking system, which ranges to a low of DDD, evaluates the effectiveness of different countries’ energy policies on the criteria of energy equity, security and sustainability.

In August, the government of Prime Minister David Cameron reduced the subsidies and other support that it had been providing to wind farms and small solar projects. At the same time it changed the rules for other alternative energy projects to qualify for financial support.

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The WEC said this approach hurts Britain’s image as a supporter of renewable energy and that reducing subsidies narrows the UK’s capacity margins. As a result, the kingdom faces “significant challenges” in ensuring its future energy supply. And so it’s been put on a “watch list” of countries with similar risks.

“The UK government must give more predictability to investors in the way the electricity market reforms are progressed,” added Joan MacNaughton, the executive chair of the World Energy Trilemma study. “If the UK is to remain ahead of the pack, and regain its ‘triple A’ positioning, the government must give more predictability to investors.”

Others on the watch include Germany, Japan, Italy, Mexico, South Africa, Serbia, the United Arab Emirates and the United States. South Africa was added to the list this year because of its electricity crisis, and the United States was added, also in 2015, because of a lack of investment in aging infrastructure and the country’s vulnerability to harsh weather.

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At the top of the WEC index is Switzerland, for the second consecutive year. But its standing may not last because the Swiss government has decided to stop investing in new nuclear power plants and plans a referendum soon on eventually eliminating nuclear power altogether. These factors “are likely to have a strong impact on the country’s energy sustainability balance,” the WEC said.

When the British government reduced financial support for renewable energies, it said the subsidies were simply too expensive for British taxpayers to shoulder. Rudd reinforced this message during the annual conference of the Conservative Party in Manchester on Oct. 5.

“I support cutting subsidies,” Rudd said, “not because I am an anti-green Conservative, but because I am a proud green Conservative on the side of the consumer. We must be tough on subsidies. Only then can we deliver the change we need.”

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Britain’s standing in the WEC’s Energy Trilemma Index isn’t the only victim of the government’s decision to cut subsidies. Last month the Mark Group Ltd. was forced into administration – the British equivalent of Chapter 11 bankruptcy – because of the reduction in subsidies. As a result, the company was forced to lay off its 939 employees.

The U.S. company SunEdison Inc. had been paying the Mark Group to install solar panels on customers’ roofs for free in exchange for a share in the customers’ savings from government-subsidized energy bills. SunEdison said it regretted the decision to end the practice, but said it had no other choice.

By Andy Tully of Oilprice.com

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