Renewables obligation too expensive says Public Accounts Committee

The Select Committee on Public Accounts has criticised the renewables obligation, saying that it is too expensive, poorly targeted, and not subject to Parliamentary scrutiny.

In its first report into the initiatives that have been put in place by the DTI on renewable energy, the Public Accounts Committee found numerous criticisms of the mechanism which requires all electricity suppliers to source a growing percentage of their sales each year from renewable sources.

The RO is designed to push up demand for renewable energy, thus increasing the revenue that generators can earn. This in turn encourages developers to invest in new generating capacity, and the suppliers pass the higher cost of purchasing renewable electricity on to consumers.

The Committee report found that the RO will cost consumers £1 billion per annum by 2010, rising to £1.5 billion per annum by 2015.

It says that this is “at least four times more expensive than other means of reducing carbon dioxide currently used in the UK”, and that a carbon tax managed by Defra would be a less complex way of managing emissions.

In addition, the report points out that around a third of the support provided by the RO exceeds the extra cost of renewable generation as it provides the same level of support to all eligible technologies and sites regardless of their costs or long term potential to deliver reductions in carbon dioxide.

The report states: “As part of its 2005 review of the Renewables Obligation the Department should reduce the excess support in the scheme. It could for example, taper or phase out support for lower cost renewable technologies which have limited growth potential, such as landfill gas, or limit the number of years individual generating sites can benefit from the scheme.”

Perhaps the greatest criticism, aside from the cost, is the unaccountability. The report states that the 2010 target requires the costs of the RO to be acceptable to consumers, then goes on to say: “But, the Department has no means of informing its judgement on this issue. It should consider surveying consumers or consulting consumer bodies, such as energy watch.”

Chairman of the all-party committee Edward Leigh, a Conservative MP, said the lack of scrutiny by Parliament was “unacceptable.”

However, the renewable energy industry called the report “depressingly one-sided.”

Philip Wolfe, Chief executive of the Renewable Power Association said: “The committee has studied spending on renewable energy without assessing the scale of climate change, the problem we are addressing.”

“The reality is that current expenditure on renewables is miniscule alongside the damage already caused by climate change, let alone the thousands of billions we will have to spend if it is allowed to continue unabated.”

He was also critical of the comments on renewable energy. “The committee seems to endorse opposition to wind power. It suggests eliminating support for landfill gas, and asks if support for biomass should continue. They forget that landfill gas and biomass currently provide the largest contribution to the country’s Renewables Obligation.”

These views were echoed by the British Wind Energy Association’s CEO Marcus Rand. He said that the extra costs of renewables was well known.

“Given recent dramatic fluctuations in the price of gas and subsequent increases on domestic electricity tariffs this is a relatively small increase of 5% on domestic bills. This relatively small increase in bills will also deliver a new industry, increased security of supply and significant climate benefits.”

“Furthermore, opinion polls have shown that the public view renewables, such as wind power, as their preferred generation option going forward. Other options, whether they be clean coal, carbon capture or nuclear will also cost consumers additional money and will require government intervention to bring new capacity to the market. Renewables, such as wind, also provide long-term energy security and play a fundamental role in enabling us to deliver on our 2010 carbon reduction targets. Without wind power, both on and offshore the UK will miss by a long way its 2010 carbon goals and this will place even greater strain on our overall energy security.”

By David Hopkins

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