Energy secretary Amber Rudd announced this week that the government will provide no more subsidies for the onshore wind sector, provided via the Renewables Obligation, after April 2016.
Ending subsidies was a Conservative election manifesto commitment. However, industry had not been expecting the subsidy regime to close until 2017.
The government is bound by an EU agreement to generate 15% of energy from renewable sources by 2020. According to the Department of Energy & Climate Change (DECC) there is enough onshore wind power already being generated or planned – 13.8GW in total – to meet the target.
Miss Rudd told the House of Commons: “The government is committed to meeting objectives on cutting carbon emissions and the UK’s 2020 renewable energy targets. Onshore wind has deployed successfully to-date and is an important part of our energy mix. We now have enough onshore wind in the pipeline, to be subsidised by bill payers through the Renewable Obligation or Contracts for Difference, for onshore wind to play a significant part in meeting our renewable energy commitments.”
She said: “I am now setting out proposals to end new subsidies for onshore wind, specifically in relation to the Renewables Obligation (RO). Onshore wind is currently subsidised through three schemes: Contracts for Difference (CfDs) introduced by the last government, and the Renewables Obligation and Feed-in-Tariffs introduced previously.
“With regard to CfDs, we have the tools available to implement our manifesto commitments on onshore wind and I will set out how I will do so when announcing plans in relation to further CfD allocations. I will also shortly be considering options for continued support for community onshore wind projects through the feed-in tariff (FITs) as part of the review that my department is conducting this year.
“The RO supports the overwhelming majority of current and future onshore wind capacity. Unlike CfDs, which introduce competition for subsidy and therefore drive costs down more quickly, the RO is demand-led and so poses more risk of pressure on consumer bills from increased demand for the subsidy. I am therefore announcing today that we will be introducing primary legislation to close the RO to new onshore wind from 1st April 2016 – a year earlier than planned.”
She added: “To protect investor confidence in the wider renewables sector, I am proposing a grace period which would continue to give access to support under the RO to those projects which, as of today, already have planning consent, a grid connection offer and acceptance, and evidence of land rights for the site on which their project will be built.”
Alan Watt, chief executive of the Civil Engineering Contractors Association in Scotland, called for the decision to be reversed. He said: "This is extremely bad news for Scottish communities and Scotland's civil engineering sector which have been working to an orderly programme of renewables projects based on a well-established subsidy schedule. Notwithstanding the effects on renewable targets, we agree wholeheartedly with the Scottish government that this early withdrawal of support will have a serious impact on Scottish businesses and jobs, particularly in remote areas where alternative employment is hard to come by, and we call upon the UK government to reverse this decision and reinstate the original timetable."
Scotland’s energy minister Fergus Ewing said that ending support for the onshore wind sector would have a disproportionate impact on Scotland. He said: “The decision by the UK government to end the Renewables Obligation next year is deeply regrettable and will have a disproportionate impact on Scotland as around 70% of onshore wind projects in the UK planning system are here.
“This announcement goes further than what had been previously indicated. It is not the scrapping of a ‘new’ subsidy that was promised but a reduction of an existing regime – and one under which companies and communities have already planned investment.
“Onshore wind is already the lowest cost of all low carbon options, as well the vital contribution it makes towards tackling climate change, which means it should be the last one to be scrapped, curtailed or restricted.
“The UK government has ignored the concerns of businesses and organisations who are integral to the future energy security of both Scotland and the UK, as well as to environmental organisations who recognise the importance of renewable energy in helping reduce emissions. The UK government have chosen to place at risk a huge investment pipeline, conceived in good faith by developers based on statements from the UK Government.
“The decision will cause huge uncertainty for investors not just in onshore but across the renewables sector as a whole - especially as there is no information as to other onshore wind schemes under Electricity Market Reform Contracts for Difference or those smaller than 5 MW under the Feed in Tariff.
“Moreover, the decision will prevent onshore schemes proceeding whilst offshore wind will go ahead despite receiving far more generous subsidies. This, the industry claim, will lead to extra costs for consumers of possibly around £2-3 billion.; and must be irrational in that respect.
“Therefore we have warned the UK government that the decision, which appears irrational, may well be the subject of a Judicial Review.
The business community also expressed concern. Confederation of British Industry deputy director-general Katja Hall said: “Cutting the Renewables Obligation scheme early sends a worrying signal about the stability of the UK’s energy policy framework. This is a blow, not just to the industry, and could damage our reputation as a good place to invest in energy infrastructure.”
The government also said that its Energy Bill would change the planning system for wind farms, so that they go through local council planning approval and not central government.