Further subsidy cuts for renewables: the industry reacts

The government has delivered yet another blow to the renewables industry with a “galling” proposal to end subsidies for biomass and small solar projects.

The government announced this week that it would withdraw a total of £500 million of support for biomass and an unconfirmed amount for small-scale solar, following the revelation that the Department of Energy and Climate Change (Decc) overspent its £7.6 billion budget for the Levy Control Framework by £1.5 billion.

The reaction from the renewables industry has been explosive, with green groups slamming the government for “another hand brake turn” on energy policy which they say will stifle investment in renewables and increase the cost of developing renewable projects.

“The timing couldn’t be worse as the sector is on transition to subsidy free and is cheap form of renewable energy,” warns Greenpeace head of energy campaign Daisy Sands. “The government is set on destabilising the booming but young solar industry. If the proposals to the consultation are implemented the government will be choosing to protect subsidies to EDF whilst withdrawing support for the communities, businesses and households’ efforts to install solar panels.”

The news follows recent announcements that the Decc would cut Renewables Obligation (RO) funding for onshore wind, which brought on a similar deluge of fierce comment from green groups. However, unlike the onshore wind announcements, cuts to solar subsidies were not outlined in the Conservative manifesto.

Solar power met 15 per cent of UK’s energy demand on the afternoon of Friday 3 July and with continued support from the government over the next 5 years, chief executive of Good Energy Juliet Davenport says solar would “soon be one of the cheapest forms of electricity generation”.

Inenco principle risk manager Matt Osborne says reducing subsidies to small-scale generators where they are “more critical” for their financing runs the risk of “rapidly reducing further investment in this area”.

“The uncertainty around future support for renewables will undoubtedly put many projects in development on hold and any potential investor in UK infrastructure will be watching with concern as stability is replaced by uncertainty, rendering future investment decisions all but impossible,” he argues.

Here’s how industry reacted to the government’s proposal to cut funding for biomass and small-scale solar:

Shadow energy secretary Caroline Flint

“This announcement creates further uncertainty right across the renewable sector. Renewables should move towards being free of subsidy, but retrospective changes that cost jobs and cut investment will make that harder to achieve.

“Since taking office the government have undermined two of the cheapest forms of clean energy, onshore wind and solar. Hampering the development of cheap forms of clean energy will see bills rise, not fall.”

Energy and Climate Change Committee chair Angus MacNeil

“The measures announced by Decc today raise more alarming questions for investors in low carbon, renewable technologies who are already struggling to finance projects after a series of sudden policy changes.

“The latest changes remove the current certainty for the lowest cost renewable technologies whilst failing to provide any indication of the future investment landscape. Decc has stated that it will set out totals for the Levy Control Framework beyond 2020 but has given no indication of when it will provide this information leaving industry in limbo.”

Greenpeace head of energy campaign Daisy Sands

“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.”

Renewable UK chief executive Maria McCaffery

“This announcement is yet another hand brake turn on energy policy. It will cause dismay in Britain’s medium-scale wind energy sector. Removing certainty will worry energy investors and can only increase the cost of developing renewable projects. Government knows this, but is pressing ahead regardless.”

Renewable Energy Association (REA) chief executive Nina Skorupska

“The industry is at a critical point as it seeks to reach grid-parity as quickly as possible yet retain the size and scale necessary to become a key contributor to the UK economy. We will be working with Government to ensure that the sector remains of a sufficient size, capable of delivering cheap, low carbon electricity up to 2020 and beyond.”

Solar Trade Association head of external affairs Leonie Greene

“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.

“The possible removal going forwards of the guarantee on a set level of support throughout a project’s lifetime once built is a real blow to investor confidence.”

Good Energy chief executive Juliet Davenport

“Ending support for solar power makes no sense at all. On one hand the government says it wants to keep household energy bills down by removing support for clean solar power, yet on the other promises massive subsidies to nuclear.”

Inenco principle risk manager Matt Osborne

“Renewable subsidies have added significant costs to the energy bill in recent years and tackling this will be welcome news to both businesses and consumers. However, this does create further regulatory and investment uncertainty for both renewables and UK generation as whole.”

University College London professor of international energy and climate change policy Michael Grubb

“This is a pivotal moment in UK energy policy, on which it is beginning to look like the UK has two governments. One is that pressing for strong international action on climate change, which signed an unambiguous cross-party pledge to phase out unabated coal, reiterated its carbon targets and which committed in its manifesto to deliver clean renewable energy as cost-effectively as possible.

“The other is a government which has moved to prematurely end supports for the cheapest of the UK’s main renewable resources, which has injected fear and uncertainty into renewable energy investors – and which seems set to also scrap energy efficiency programmes which have helped to cut consumer bills and avoided the need for billions of pounds of new fossil fuel investments.”