Renewable energy subsidies to be revised downwards after ‘overspend’

Onshore wind and large-scale solar sectors to be hit

The government made moves to reduce support for biomass, solar and wind energy projects over the summer, announcing plans to reduce subsidies for larger solar installations and to end public subsidies for onshore wind farms altogether.

In July, Energy and Climate Change Secretary Amber Rudd announced a series of measures to deal with ‘a projected over-allocation of renewable energy subsidies’ by the government. She proposed reducing funds available for biomass conversion and co-firing projects, and a consultation on reducing subsidies for solar PV plants of 5 MW and smaller. 

Rudd said that the government has successfully provided vital financial support to the renewable sector, but the Office for Budget Responsibility is now projecting that subsidies raised from bills are set to be higher than expected when the schemes under the Levy Control Framework (LCF) – a capping mechanism on total subsidies – were set up.

This is due, says the government, to a number of uncontrollable factors such as lower wholesale electricity prices, higher than expected uptake of the demand-led Feed in Tariffs and the Renewables Obligation (RO) and a faster than expected advancement in the efficiency of technologies, meaning renewables are projected to generate more electricity than previously projected.

The measures announced in July include:

• Removing the guaranteed level of subsidy for biomass conversions and co-firing projects for the duration of the RO, known as grandfathering.
• Launching a consultation on controlling subsidies for solar PV of 5 MW and below under the RO. This includes consulting on early closure and removing the guaranteed level of subsidy for the duration of the RO.
• A consultation on changes to the preliminary accreditation rules under the Feed-in Tariff scheme.

Announcing these changes, Rudd said: ‘My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way. Our support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment.’

A month earlier, in June, the government announced its intention to end new public subsidies for onshore wind farms by legislating to close the RO across Great Britain to new onshore wind projects from April 2016. Up to 5.2 GW of onshore wind capacity could be eligible for grace periods which the government is ‘minded’ to offer to projects that already have planning consent, a grid connection offer and acceptance.

Reaction to the announcements from the solar and wind energy industries was predictably critical, with some commentators suggesting the effect of the effect could be to scare off potential investors in renewable technologies. Others suggested that it is important for the government to review the technical and economic maturity of renewables technologies, particularly those with falling costs.