Chancellor George Osborne has announced a £500m package of support for the gas industry as details of the Renewables Obligation Certification confirm a 10% reduction – with a further review next year.
The dash-for-gas funding will cost the taxpayer £20m-a-year but will allow further investment in North Sea gas fields.
The Treasury claims the allowance will provide certainty to investors on the UK’s long-term commitment to gas as a vital part of the transition towards low-carbon energy generation.
Energy Secretary Ed Davey has also confirmed details of the revised level of the Renewables Obligation Certification (ROC) for onshore wind electricity generation, which will be in effect until March 2014.
Chancellor George Osborne said: “Gas is the single biggest source of energy in the UK. Today the government is signalling its long-term commitment to the role it can play in delivering a stable, secure and lower-carbon energy mix.
“At the Budget, we announced an ambitious package of support to stimulate billions of investment in oil and gas production in the North Sea. Today’s news is a further sign of the Government’s determination to get the most out of a huge national asset.”
Taken together, the Government claims both these announcements are intended to give investors the long-term certainty needed to make decisions on investment in both gas and renewable power.
Energy Secretary Ed Davey said changes to subsidies for renewable electricity could incentivise between £20 billion and £25 billion of new investment in the economy between 2013 and 2017.
He claims the Banding Review for the Renewables Obligation will support jobs and deliver more clean power with a reduction in costs to consumers between 2013 and 2015.
In a statement, Mr Davey, said:“Renewable energy will create a multi-billion pound boom for the British economy, driving growth and supporting jobs across the country.
“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.”
“Because value for money is vital, we will bring forward more renewable electricity while reducing the impact on consumer bills between 2013 and 2015, saving £6 off household energy bills next year and £5 the year after.”
The Banding Review sets out that:
* Support for onshore wind from 2013-17 will be reduced by 10% to 0.9ROCs, as consulted on in Autumn 2011. This level is guaranteed until at least 2014 but could change after then if there is a significant change in generation costs. A call for evidence on onshore wind industry costs will be launched this Autumn and report in early 2013. If the findings identify a significant change, the Government will initiate an immediate review of ROC levels with any new support arrangements taking effect from April 2014, with grandfathering and grace periods for projects already committed. The call for evidence will also consider how local communities can have more of a say over, and receive greater economic benefit from, hosting onshore windfarms;
* Rates of support for offshore wind will reduce as the cost of the technology comes down during the decade;
* Support levels for certain marine energy technologies will more than double from 2ROCs to 5ROCs per MWh, subject to a 30MW limit per generating station;
* There will be a new band to support existing coal plant converting to sustainable biomass fuels. This will increase the amount of renewable energy produced at less cost to consumers; and
* There will be no immediate reduction in support for large-scale solar, but there will be a further consultation this year on reduced support levels given recent dramatic falls in costs.
By 2017, DECC claims this package could deliver as much as 79 TWh of renewable electricity per annum in the UK - nearly three-quarters (74%) of the way towards the 108TWh of electricity needed to meet the UK’s 2020 renewable energy target.
These proposals are expected to bring forward 11 TWh more renewable energy in 2016/17 than current bandings, and stimulate between £20bn and £25bn of new investment.