Responding to today’s publication of Government support rates for larger scale renewable energy projects through the Renewables Obligation, Juliet Davenport, CEO & Founder of Good Energy, welcomed the announcement.
“The announcement provides some much needed clarity around the rates,” she said. “But few can deny that what we’ve gone through to reach this point has been troubling.
“The key principle that’s been at stake is whether the Government is committed to an independent, evidence-based process for setting support levels for renewables and whether that process is able to withstand political meddling.
“Whilst question marks do remain for some technologies, today’s announcement shows that that is the case. The integrity of the rate review has been maintained and it will be used to inform any outstanding decisions. That’s crucial for maintaining investor confidence. Perhaps most important for us is that, as the UK’s leading 100% renewable electricity supplier, our existing capacity to generate clean, renewable power remains untouched.”
Seb Berry, head of public affairs for Solarcentury, added: "The last thing this industry needs is yet another consultation on support levels. Ministers keep promising this industry 'TLC' - transparency, longevity and certainty - but today's decision does the very opposite.
“The consultation response confirms that PV is already a more cost-effective technology than offshore wind and yet investors in the cheaper technology are now in limbo land awaiting yet another consultation and unable to commit to projects beyond March 2013.
"The Government's proposal that the ROC level for large-scale PV should be slashed to that of the equivalent feed-in tariff rate from April 2013 suggests that DECC is not serious about its 22 GWp ambition.
"The reduced FIT rates for large-scale PV have delivered precisely zero installations in the whole of May and June and we see no prospect of the FIT rate for 'large-scale' PV being attractive to investors in eight months time."
John Cridland, CBI Director-General, said of today's announcement: “The level of support the Government has agreed for onshore wind will help to encourage investment into our energy sector, creating jobs and supporting growth. Companies must be able to invest with confidence so that we can have secure, affordable and low-carbon electricity in the decades to come.
“The Government is right that gas should play a crucial role in any future energy mix. We have argued that there is no need for a false choice between renewables, nuclear, gas, and carbon capture and storage. It’s clear from the evidence that we need a diverse supply.”
Commenting on the new Renewable Obligation banding levels, Scotland's Energy Minister Fergus Ewing said: "I welcome the UK Government's decision to follow Scotland's lead and set its own onshore wind band at 0.9 ROCS, but I am concerned at the UK Government's decision to only set this band for one year, until 2014, pending the outcome of yet another review.
"The onshore wind sector needs certainty to enable it to make investment decisions, which is why last week the First Minister wrote to Ed Davey to indicate that the Scottish Government will keep its onshore wind band at 0.9 ROCS for the next four years. If any evidence is produced which triggers a review of that band, we will consider such material as and when it becomes available.
"I am concerned that the UK Government's explicit statement about another and immediate review of onshore wind costs will not dispel the uncertainty for the industry and investors that recent speculation has been allowed to create. These projects represent long term investments, which could be unnecessarily delayed by the short term aspects of today's announcement by DECC. This short termism can only damage investor confidence and I call on DECC to remove these uncertainties.
"Scottish Ministers are completing our consideration of the consultation outcome in Scotland, and we will announce our own full response to the Renewable Obligation review shortly."
Niall Stuart, Chief Executive of Scottish Renewables, said: “The cut in support for onshore wind strikes the right balance between keeping energy bills down for consumers and ensuring we maintain investment in this sector.
“Onshore wind has become increasingly competitive and evidence supports the 10 per cent cut in the RO finally confirmed by government from 01 April 2013.
"However, the announcement that government is launching a further review of support for onshore wind later this year only creates further uncertainty and makes it difficult for the industry to plan ahead, though we are pleased that the decision on any changes in 2014 will be based on evidence rather than political views.”
In October 2011 the Scottish Government and UK Government both launched consultations on proposed changes to the financial support provided to the renewable energy industry known as Renewable Obligation Certificates (ROC). One of the main proposals was to lower the support for onshore wind from 1 ROC to 0.9 from April 2013.
Today’s announcement only applies in England and Wales. The Scottish Government will publish its own support levels later this year based on the same analysis used by DECC, and it is expected to introduce similar levels of support for most forms of renewables.
Commenting on the announcement from Energy Secretary Ed Davey that hydropower will see a 30 per cent cut in financial support, Mr Stuart said: “The considerable cut in support for hydro means that companies will have to re-consider some major investments. Feedback from the industry suggests a number of planned schemes may not go ahead unless the Scottish Government increases the levels of support for hydro in Scotland in its own Banding Review.”
DECC has also announced an increase in support for marine energy in England and Wales which will now have the same levels of Renewable Obligation as in Scotland.
Mr Stuart said: “Scotland has a significant lead in marine energy development, in part because of the greater levels of financial support through the RO for developers around the Scottish coast. DECC has now removed this advantage and we need to see the Scottish Government use every additional tool they can to support the industry’s growth if we are to stay ahead of the chasing pack.”
Mr Stuart also urged the Scottish Government to look carefully at proposals for biomass to ensure this industry can play its part in Scotland’s future energy mix: “Biomass could meet a major part of Scotland’s electricity needs, and we will be working with our members and the Scottish Government to ensure that bandings for biomass in Scotland support the sustainable growth of the sector.”
Keith Allott, head of climate change at WWF-UK, said: “This is a common sense decision by DECC and Ed Davey, but as far as victories go, it’s a skirmish in the on-going battle with the Treasury that is turning energy policy into a political football.
“It seems to be getting more and more difficult to get the Government to deliver on any green issues, all too often because of the dead hand of the Treasury and George Osborne. It is remarkable that they both appear so resistant to measures to promote the green economy, when the CBI says this is one of the few bright spots of economic recovery.”
WWF also highlighted concerns that the Government was continuing to back ‘cheap’ gas, despite that fact that gas has been the main factor driving up bills in recent years, and said that continued reliance on fossil fuels seriously increased the risks posed by climate change. The group said that today’s announcement offers support of £500 million for the gas industry - dwarfing the sums involved in the row over support for renewables.
Keith Allott said: "The Committee on Climate Change has made clear that the power sector needs to be nearly carbon free by 2030, and that a new dash-for-gas is neither economically sensible nor compatible with our legal carbon budgets. The Treasury is forcing DECC to take a massive gamble that gas prices will come down, on the basis of no credible evidence, while subjecting renewable energy technologies to continual review and uncertainty.”
Arnaud Bouillé, Ernst & Young Energy and Environmental Infrastructure Director, commented on today’s news: “DECC's banding announcement is great news for the sector and will bring some short-term relief for the industry as a whole. For independent power producers however, the availability of long-term off take contracts remain an issue, affecting the availability and cost of financing. DECC's on-going consultation on this matter should not only confirm that this is a significant challenge but also identify the need for a continued obligation on UK suppliers to purchase 'green' under the proposed CfD/EMR environment.
“For onshore wind especially, the 0.9 ROC decision is a critical milestone and will give the industry some comfort over the government's commitment to the sector. Nevertheless, the affordability and value for money debate that took place in recent months is not about to go away and will already be on the agenda for the next review in 2014.
“With an oversupply in the wind turbine market, we would expect costs to reduce and the sector to be gradually wound-down off subsidies in the medium term. Onshore wind may slowly be entering the brave new world of mainstream market economics.”
RenewableUK’s Chief Executive Maria McCaffery said: “We welcome the Government’s decision to set its financial support for onshore wind energy at a level that will enable the industry to continue to grow. Although it has been a long time in coming, the final decision was based on hard economic evidence, and was not derailed by short term political considerations. We recognise that these are difficult economic times and we have been trying to drive costs down.
“RenewableUK will play a full and active role in the Government’s review of onshore wind costs. However, the review must not be allowed to create a mood of uncertainty among investors. We trust that Government will continue to send a clear signal of its commitment to building the low carbon economy this country deserves.
"We have been given clarity on funding for April 2013 to April 2014, but this is a relatively short timeframe. Investors need long term certainty, and ideally we would have welcomed a little more of that in today’s announcement. However but we shall continue to work closely with Government in the period of evidence-gathering this autumn, and we will also continue to develop initiatives for closer community engagement”.
The industry has welcomed the fact that the cut in financial support for Offshore Wind does not come into effect until April 2015, when it will be reduced from 2 ROCs to 1.9 ROCs. A further cut to 1.8 ROCs will take place in April 2016
Maria McCaffery said: “The carefully-phased reduction in financial support for offshore wind over a long timeframe shows that the Government is committed to the development of the UK’s world-leading offshore sector as a key part of our energy mix.
“In June, the industry-led offshore wind Cost Reduction Task Force published a ground-breaking report showing how we will take practical steps to reduce the cost of offshore wind energy by one-third by 2020. By then, we will have at least ten times as much offshore capacity installed as we have now, employing tens of thousands of highly skilled workers in Britain’s burgeoning low-carbon energy sector.
“These decisions for onshore and offshore wind are vital, as they provide the much-needed confidence and certainty needed to attract billions of pounds of inward investment into the UK economy, creating tens of thousands of jobs and providing energy security which will protect consumers from rising fossil fuel prices.
“We now look forward to the Energy Bill, and the details of the Government’s reforms to the electricity market which have the potential to harvest a great prize indeed: a world-beating wind turbine manufacturing industry that will export British products across the globe.”
Louise Wilson, co-founder of Abundance Generation, said: “Today’s announcements are a silver cloud with a dark grey lining. While it’s good news the onshore wind level is not going any lower than 0.9, it’s disappointing we have yet another consultation coming in autumn for post-2014. Energy is absolutely central to the fortunes of the country and this constant review creates a backdrop of uncertainty that is completely unhelpful to long-term decision-making and proper commitments to investment.
“Additionally the raging battle between DECC and the Treasury sends a very negative signal. The fact the Treasury completely misses the point on weather-related renewables lowering energy prices over time is a constant source of amazement.
“The solution is to take energy policy out of the hands of politicians and put it in the hands of an apolitical 'Energy Policy Committee'. Cheap energy is the bedrock of all economic growth. Just as monetary policy is in the hands of an independent body (Bank of England), the same should be true of energy policy. The Treasury thinks gas is cheap - that may be so today but it is still a finite resource and not controlled by the UK.
“There is a growing body of evidence from those countries who had the foresight to invest decades ago in wind (specifically Germany and Denmark), that the Merit Order Effect is lowering the cost of their energy overall. The marginal cost of a kWh of electricity generated by installed wind generators is zero and this does bring down costs. The price of gas in the long-term can only go one-way.”
Caroline Pitt, Director of Consulting at energy and carbon management specialist, Utilyx, commented: “It’s good news that the proposed levels of support for wind generation reflect the levels originally consulted on. This is a positive sign that the UK remains committed to its renewable energy targets. However, investors in all technologies need long term certainty and with further consultations planned for later this year, it is vital that there is no u-turn on this decision in a few months’ time.
“Given the size of the UK’s carbon challenge, significant investment in renewable energy is crucial and has the potential to be a key driver of economic recovery and job generation. Business can only start to realise the long term returns on investment that sustainable strategies can bring when they trust that the financial support they need is here for the long-term.”
Claire Gibson, general manager at Wave Hub, which is a 20MW testing facility for wave energy devices off the north coast of Cornwall in the UK, said: “This is excellent news and a big boost for Wave Hub and the development of marine renewables in South West England.
“Wave and tidal developers have been calling for a regime which provides investors with a clear signal that they will get a return on their investment, and that’s what today’s announcement does. In practice it means deployment at Wave Hub is now even more attractive because we already have a consented and operational site, and now there will be a much greater level of financial support available from April next year.”
The announcement was also welcomed by Cork-based Ocean Energy, which will be the first wave energy company to deploy at Wave Hub.
John McCarthy, chief executive and co-founder of Ocean Energy said: “The availability of this ROCs support is a vital part of the infrastructure necessary for the development of commercial wave energy farms. It has already been established that for wave technologies to achieve commercial maturity, support would be required from governments.
“We believe the best way to achieve this is by a combination of market push and market pull strategies. ROCs are an integral part of this market pull and a key enabler in allowing the industry to progress towards fully commercial multi-megawatt wave farms. Today’s announcement will significantly assist our own deployment at Wave Hub.”
Harry Huyton, RSPB Head of Climate Change Policy, said: “Whilst the promise of continued support for wind energy is to be welcomed, a light has been shone on the division within the heart of government over the UK's commitment to leading global efforts to avoid dangerous climate change.
“Today’s decision to maintain support for wind power at a viable level offers the renewables industry and our common fight against catastrophic climate change temporary respite. But, the rift in government over climate change policy has to be overcome. We need to change the way in which critical decisions that affect all of us and the future of the planet are made.’
The RSPB says the fresh commitment to fossil fuels, including a new half a billion pound fund to support gas extraction in the UK, threatens the ability to meet future targets to reduce carbon emissions. The RSPB has also long campaigned against biomass power plants, and says current plans for this sector would lead to the UK importing and burning 33 million tonnes of wood, threatening wildlife and undermining the climate change benefits of renewable energy.
Huyton added: “We had also hoped for decisive action to prevent new forest burning biomass power plants from being constructed in the UK. A cap on the amount of biomass power is to be welcomed, but all now depends on the level of the cap, which government is yet to decide on. We believe that the only sustainable level that the cap can be set at is zero.”
Dale Vince, Ecotricity founder, said: “Limiting the cut in support to 10% is the right decision to ensure growth renewable generation and green jobs.
“This decision should always have been evidence based and proportionate to the rate of falling costs in the industry – rather than a political decision, based on pressure from a Chancellor who obviously has a strong commitment to making the UK gas dependent.
“This Chancellor has tried to horse trade – rather than make serious energy policy and has been selective with his facts – by presenting the £5 per household support for onshore wind power as a subsidy and cost to consumers, while ignoring the rising cost of gas in the global 'free market' which added £120 to everybody's bill last year.
“It is surely abundantly clear which of these fuel sources is actually a burden to the British public – not to mention contributing to climate change.
“The problem seems to be a rather myopic view of what actually constitutes a 'cost' to consumers. In both cases it's Government policy at work, firstly to support onshore wind through supplier obligations (cost £5) and secondly to allow our country to rely so heavily on gas (cost £120). Given the relative costs you'd expect any chancellor worth their salt to be pushing for more renewable energy - not a second Dash for Gas and a second round of Nuclear build, both of which will cost us far more, now and in the long term.”
Solar Trade Association Chief Executive Paul Barwell said: “We understand that the RO is an inflexible mechanism for a technology as dynamic as solar, but proposing to exclude solar altogether sub 5MW from the RO is not the solution.
“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.
“The announcement today of changes to support levels from April 2013 will delay the implementation of solar projects under the RO. Given the recent upheavals of the UK solar industry under FITs, it was appropriate for the non-domestic solar sector to be given a period of stability to establish itself. We are keen to work with DECC to ensure that we can safeguard investor confidence, while addressing legitimate issues, as quickly as possible.”
Martin Wright, Chairman of the REA, said: “We welcome the publication of the RO Banding decision, but it is not before time. Government has re-affirmed its commitment to the renewables industry, but we are concerned about the further reviews facing many technologies, which is likely to inhibit investment.
“Business confidence is essential to realise the vast potential of this industry, in which the UK still lags behind the rest of the world. Companies will not invest without stable Government policy delivered in a timely manner. At such a critical time for the economy, this country cannot afford any further political wrangling that puts at risk future investment and job creation.
“The Chancellor’s recent letter to the Energy Secretary showed a serious misalignment between the attitude of Treasury and other Government departments charged with delivering a growing, low carbon economy. The Treasury appears to be frustrating the creation of a comprehensive energy policy for short-term economic and political gain. It is time energy policy properly reflected the long-term interests of the nation.”
The REA points out that the UK's renewable electricity generation is currently at 11% , but to meet the Government’s overall renewable energy target, it will need to reach to 30% by 2020. Significant amounts of wind capacity are in construction or have won planning consent, but more is needed, along with contributions from baseload biomass and energy from waste (EfW) technologies. With the costs of PV falling so dramatically, the REA says it also makes financial sense for solar to play a major role in meeting our targets.
The REA will strongly oppose the proposal to consult on removing FIT-eligible technologies from the RO under 5 MW.
* Firstly only one AD plant in the UK is over 5MW (out of the 22 currently supported by the RO). Removing sub 5MW AD from the RO would therefore slash the budget. The ambitions for AD under FIT are already very low.
* It argues it would be financially illogical to constrain solar PV to the FIT, which has a much smaller budget than the RO. Many solar applications are already cheaper than other technologies but the expansion of cheaper solar would be constrained if this were to happen.
Gaynor Hartnell CEO of the REA said: “After a long wait there are some disappointments in the Banding levels announced today. There is good news for hydro, advanced pyrolysis and gasification and EfW. However, we are effectively left with no deep geothermal power industry in this UK, inadequate incentive to capture methane from landfill sites and the prospect of a further review for onshore wind.”
Chris Matthews, Senior Manager - Renewable Energy at The Co-operative Bank, said: “While we strongly welcome the announcement that reductions have been limited to 10%, further clarity is needed beyond 2014 to attract ongoing investment into the sector. The time taken to secure planning and develop projects means that the investor community urgently needs government to provide certainty of support over the longer term.
“We are pleased that there are calls for evidence as to how communities can receive greater economic benefit from hosting onshore wind farms and we look forward to contributing in this area.
“However we note that consultation is ongoing in respect of all sub 5MW schemes which may now fall into the FiT regime. Again this uncertainty is unhelpful when dealing with schemes close to the 5MW limit, as we are.
“We see that there is to be greater emphasis placed on gas on the basis that it will prove to be a cheaper alternative. However, if gas prices increase, as they have over the last 10 years, then a reliance on gas could cause severe hardship.”
Are renewables the answer to the "trilema"?