As onshore wind developers praised DECC for resisting the chancellor's demands for tougher cuts to subsidies under the Renewables Obligation (RO), firms from the hydro-electric and anaerobic digestion (AD) sectors warned that new bandings to be introduced next April could be disastrous
The long-awaited bandings largely follow those proposed by DECC in a consultation at the end of 2011. Support for large tidal stream and wave arrays is to double to 5 ROCs (RO certificates) for each MWh generated, while subsidies for offshore wind and geothermal installations, gradually decrease from 2 ROCs to 1.8 ROCs by 2016/17.
Despite significant pressure from the Treasury to cut subsidies for onshore wind installations by 25%, the energy department followed its earlier proposal of a 10% reduction. However, in a concession to finance ministers, DECC agreed to potentially reduce support for the technology as early as April 2014, if generation costs are shown to be falling.
The 10% cut was welcomed as sensible by the industry.
“Although it has been a long time in coming, the final decision was based on hard economic evidence, and not derailed by short-term political considerations,” commented Maria McCaffery, chief executive of wind and marine energy body RenewableUK.
Representatives from energy-from-waste and hyrdo-electric firms, however, were not pleased with DECC’s decision to reduce support for the technologies by 30% (to 0.7 ROCs), although it had originally planned to halve subsidies.
Energy company SSE, which is the main hydro-electric generator in Scotland, announced that as a result of the changes to the ROC bandings it no longer expects to develop any new conventional hydro-electric schemes.
One unexpected development was the energy department’s announcement that it is considering withdrawing support under the RO for solar photovoltaics (PV), hydro and AD installations that generate less than 5MW of electricity, stating that they could be adequately supported by the feed-in tariff (FIT) scheme.
In its official consultation response DECC claimed that the current level of support for solar would “substantially over-reward” the technology.
Paul Barwell, chief executive of the Solar Trade Association, however, argued that the plan was potentially self-defeating. “Unless the FIT budget cap is greatly increased, this will mean unfairly constraining a cost-effective technology,” he commented.
Meanwhile, the Renewable Energy Association (REA) warned that the move would be a “disaster” for AD, with only one of the 22 plants supported by the RO over the 5MW threshold. “This move 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,” said David Collins, REA’s head of biogas.
The RO announcement followed confirmation of future subsidies levels under the FIT for technologies other than solar PV (changes to which took effect from 1 August).
The new tariffs are almost exactly as proposed, with the biggest cuts made to domestic-sized wind installations (down to 21p/kWh from 35.8p/kWh) but with the majority of wind, hydro and AD tariffs receiving small reductions and microCHP a 2p/kWh increase.
DECC has, however, introduced a new tariff banding for medium-sized hydro projects (100–500kW) paying 15.5p/kWh, and postponed the introduction of the new tariffs from 1 October until 1 December.
The energy department has also confirmed that, as of April 2014, all the tariffs will be reduced annually to ensure the scheme does not exceed its budget. Cuts will range from 2.5% to 20%, depending on the number of installations applying for the scheme.
Similarly, DECC is proposing to introduce a long-term tariff-reduction plan for the Renewable Heat Initiative (RHI). Introduced last November for non-domestic buildings, and due to be expanded to domestic properties in September, the RHI has already been altered to introduce a first year spending cap of £70 million.
Under new plans out for consultation, DECC will assess uptake of the scheme each quarter and reduce payments when the number of installations has reached specific trigger levels.
13th August 2012