Changes to renewables' support receives mixed response

3rd October 2014

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Jennifer Jack

A series of announcements by Decc on funding arrangements for renewable energy will see a cash boost for district heat networks, but cuts for solar developers.

The energy department this morning announced that 32 local authorities have been successful in their bids for grant funding from its heat network delivery unit. The councils will share almost £2.4 million to support development of heat networks.

These supply heat to buildings or homes that is transported from a central source through a system of insulated pipes, which is both more cost and energy efficient.

The successful councils include city councils in Brighton and Hove; Leeds, Milton Keynes and Oxford; and the county councils of Cornwall, Lancashire and Leicestershire. The London boroughs of Enfield, Lambeth and Lewisham also had their bids accepted by Decc.

Alongside this funding, the government announced £7 million funding competition to support developers of new heat network technologies, such as recovering industrial heat or energy from waste.

There are approximately 2,000 heat networks in the UK, supplying heat to 210,000 homes and 1,700 commercial and public buildings. At least another 150 schemes are under development by councils, reports Decc.

Meanwhile, the solar industry has warned that the government risks damaging the expansion of solar in the UK after Decc confirmed that new solar energy schemes over 5MW will not be able to claim support from the renewables obligation (RO) from 1 April 2015.

The government has opened a consultation on a grace period for projects on track to be commissioned before the April deadline but which risk not going live due to delays in connecting to the grid.

This is in addition to the grace period introduced to protect projects that had already made significant financial commitments by 13 May 2014, when the change was originally announced.

Decc says solar needs to be removed from the RO two years earlier than originally planned because of pressures on the scheme’s budget. However, Decc’s own figures show that solar power took just 1.3% of the RO budget in 2013/14, according to the Solar Trade Association (STA).

The trade body also said that Decc’s decision is based on modelling from 2012, which does not reflect the reductions since in the cost of technology.

Paul Barwell, STA chief executive said: “A fair outcome would be an RO banding review based on up-to-date costs, which we have provided to Decc. Our message to ministers is simple: Let us compete on a level footing with the other technologies that still get RO support.”

The government also announced the structure of its contract for difference (CfD) scheme, which will see developers of low carbon electricity projects compete at auction for generation contracts. Established technologies, such as onshore wind and solar, will compete for up to £65 million in support, which is an increase from the £50 million originally announced.

Less established technologies, such as offshore wind and marine, will compete for a separate £235 million pot of money – up from an initial pledge of £155 million.

Renewable UK welcomed the additional funding.

However, it said that the increase would not necessarily be reflected in new capacity as Decc has simultaneously reduced its estimate of how much electricity will cost per megawatt hour between 2015 and 2021 by around £10/MWh. The trade body said this will wipe out much of the gains through the increased CfD funding.

Gordon Edge, director of policy at Renewable UK, said: “When you weigh the good news of the extra funding against the bad news on the reference price, offshore wind developers will end up only slightly better off and onshore wind developers end up in about the same place as they were under the original budget.”

Decc also announced that it will consult later this year on allowing businesses to transfer solar panels and feed-in-tariff payments to a new building, to encourage investment in solar PV for property owners who anticipate tenants moving premises before they receive payback.

Meanwhile, Scottish energy minister Fergus Ewing yesterday announced that the Scottish government will contribute £450,000 contribution to a €7 million fund for research and development into wave and tidal energy.

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