Subsidies for onshore windfarms under the Renewables Obligation (RO) will not be cut as deeply as feared, despite pressure from the Treasury, but support could be reduced again as early as 2014
DECC has finally published the levels of support renewable energy technologies can expect under the RO from April 2013, after agreeing concessions with the Treasury over the role of gas in the UK’s future energy mix and potentially cutting onshore wind subsidies further in 2014.
Many of the new bandings, including those for offshore wind, geothermal, wave and tidal technologies have been confirmed as those outlined in a DECC consultation at the end of 2011 – with support for offshore wind and geothermal gradually decreasing from 2 ROCs (Renewable Obligation Certificates) to 1.8 between 2013/14 and 2016/17, and support for large tidal stream and wave arrays more than doubling to 5 ROCs.
There were changes to the levels elsewhere to those proposed earlier by DECC. Rather than support for EfW plants being cut by 50%, from 1 ROC to 0.5 ROCs, and withdrawing support for plants capturing gas from landfill sites, the final bandings see EfW subsidies reduced to 0.7 ROCs, and new ROC bandings introduced for closed landfill sites that capture gas (0.2 ROCs/MWh) and for existing and new sites that are generating electricity using waste heat (0.1 ROCs/MWh). DECC has also introduced a number of new bandings for biomass burning plants.
Resisting pressure from the Treasury to cut subsidies for onshore wind by up to 25%, the energy department has confirmed that support under the RO will be cut by 10%, to 0.9 ROCs. However, in its formal consultation response DECC confirmed that it will potentially reduce subsidy levels further if generation costs are shown to be falling for onshore wind. The department will be calling for evidence on costs from the sector in the autumn and subsidy levels could be cut as early as April 2014.
In another surprising move, the energy department revealed that it will be consulting on withdrawing support under the RO for installations generating less than 5MW of electricity across a range of technologies, including solar photovoltaics, hydro and anaerobic digestion (AD), stating that, for solar in particular, the “level of support proposed in the consultation would substantially over-reward this technology”.
DECC proposes that such installations can be adequately supported by the feed-in tariff (FIT) scheme, however, the Renewable Energy Association (REA) warned the move would be a “disaster” for AD as only one of the plants currently supported by the RO is over the 5MW threshold.
“On top of the new tough capacity restrictions for AD under the FIT we now face the prospect of the end of support under the RO – this totally contradicts government aspirations in Defra’s AD strategy and ensures that we will fail to achieve the targets for biogas under our national renewable energy action plan,” argued REA’s head of biogas David Collins.
Paul Barwell, chief executive of the Solar Trade Association, commented: “Unless the FIT budget cap is greatly increased, this will mean unfairly constraining a cost-effective technology. This is not in the interests of public value for money so it is a potentially self-defeating proposal.
Alongside the bandings announcement DECC met the chancellor’s request, in a letter to Ed Davey on 9 July, to acknowledge that gas will provide a significant contribution electricity generation into the 2030s.
“We do not expect the role of gas to be restricted to providing back up to renewables,” the statement confirms. “And in the longer term we see an important role for gas with carbon capture and storage.”
DECC also confirmed it would be providing a further £500 million of subsidies for gas abstraction, and will be publishing its strategy on gas in the autumn.
Manufacturing body, EEF, warned that high-profile political wrangling over subsidy levels highlighted the need for a more coherent approach to energy policy.
“The government needs to move to a technology neutral approach as soon as possible to keep costs down and avoid these destabilising debates in the future,” said Roger Salomone, EEF’s head of business environment.
