Solar subsidies to end as Government seeks to control costs
The Department for Energy and Climate Change has dealt another series of blows to the renewable energy industry with fresh proposals to cease financial support for solar and biomass conversion plants and amend the feed-in tariff (FiT) scheme for smaller projects.
The announcements were made by Energy Secretary Amber Rudd this morning (22 July), as part of new measures to deal with a projected over-allocation of renewable energy subsidies through the Levy Control Framework (LCF).
“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,” said Rudd.
“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”.
The Government has launched a consultation on proposals to end support for solar PV of 5MW and below under the Renewables Obligation (RO) subsidy scheme from April 2016. This follows a similar move last year which saw solar farms of more than 5MW in size – about 25 acres – excluded from receiving support from the RO scheme as of April this year.
Industry body the Solar Trade Association (STA) says today’s announcements will prove “a real blow to investor confidence”. The STA’s head of external affairs Leonie Greene said: “This is damaging for big solar rooftops as well as solar farms, both very cost-effective ways of generating solar power. This contrasts with repeated commitments from Government to boost the commercial solar rooftop market.”
“There is no pledge in the Conservative manifesto about cutting support for solar, so we are disappointed by this move. Solar is the nation’s most popular form of energy, as the Government’s own opinion polls have shown.”
Greenpeace head of energy campaign Daisy Sands added: “Cutting the subsidies now will see businesses go bust and investment dry up. The timing couldn't be worse as the sector is on transition to subsidy free and is cheap form of renewable energy. It is galling when tax breaks and subsidies have propped up the oil, gas and nuclear industries for decades.
“Jobs will go and emissions will stay higher at a time when policies and funding should be in place to ensure that people can participate in contributing to the UK’s diverse energy mix.”
DECC is also proposing to end ‘grandfathering’ for for solar projects of 5MW and below from now on. Grandfathering is the guarantee that a certain level of subsidy will be provided throughout the lifetime of a renewable energy project once built.
The Department also confirmed it will go ahead with plans to end grandfathering rights for biomass conversion and co-firing projects under the RO, in a further bid to reduce pressure on the budget. This could reduce the risk of more allocations under the LCF by around £500m a year in 2020/21, the Department says.
The moves were accompanied by a separate consultation on changes to the preliminary accreditation rules under the Feed-in Tariff (FIT) scheme. That consultation proposes to stop the process of ‘pre-accreditation’, which gives renewable energy generators a guaranteed tariff level in advance of commissioning their installation.
“We consider it essential to ensure the FIT scheme is affordable and place it on a sustainable footing,” the consultation states. “Further deployment under the scheme beyond projected levels creates a significant additional risk of overshooting the LCF and putting pressure on consumer bills.
“The ability to pre-accredit under the FIT scheme facilitates deployment under the scheme, and as we are in the process of reviewing the whole FIT scheme, it is appropriate to consider whether this mechanism is still of use under the scheme.”
Today’s announcement is another kick in the teeth for the renewable energy industry under the new Government. In the three months since the election, the Tories have so far overseen the scrapping of a tax exemption for renewable energy, the end of subsidies for onshore wind, a budget cut for DECC and the selling off of the Green Investment Bank.
Yesterday, Rudd took part in her first Select Committee hearing; answering crucial questions on the Government's approach to renewable energy subsidies, energy efficiency, fracking and climate change.
The Levy Control Framework (LCF) - which is meant to provide clean energy subsidies through to 2020/21 – came under particular scrutiny in the hearing. Labour MP Alan Whitehead - who sits on the Climate Change Committee and has previously claimed that the LCF is "effectively completely bust" - questioned Rudd, who admitted that the Levy have risen from £7.6bn to £9.1bn by 2020/21.
Rudd said: "I am acutely aware of the need to give some certainty after 2020/21, but I'm also aware we were the first country to give certainty for those five years when we first set it out. I am in discussions to see what could be said about a future LCF after 2021."
In today’s announcement, the Government said it will also set out totals for the LCF beyond 2020, providing a basis for electricity investment into the next decade.