Hendry hints that RO banding may not be swayed by anti-wind lobby

Energy minister Charles Hendry has hinted that the renewables obligation rebanding, expected to be announced imminently, may not be radically different from what was set out last year in consultation.

In a letter to Energy and Climate Change Committee chair Tim Yeo, Hendry said that while he “can’t pre-empt the final banding review decision, I want you to know that the Government remains committed to setting bands based on sound evidence…. I would like to assure you that we will be transparent open and will follow the evidence”.

However, Hendry did not rule out a lower subsidy for on and offshore wind. He said 4,000 responses to the consultation had produced “a substantial amount of new evidence and information”. The banding review would “fully reflect all the evidence we have received,” he said.

Hendry was responding to Yeo’s request to Chloe Smith, economic secretary to the Treasury, that the Treasury answer the Committee’s questions on the draft Energy Bill. As lead minister for the bill, Hendry said it was “appropriate” for him to answer instead.

On whether the government needed to update its impact assessment for electricity market reform (EMR), given the confusion around the counterparty model for contracts for difference (CfDs),  Hendry said not, “because the choice of counterparty doesn’t impact on its underpinning assumptions”. However, he said Decc would “of course produce an updated impact assessment when we introduce the bill”.

Regarding fears that confidence in long term contracts would be eroded by the constraints of the Levy Control Framework, Hendry said that “appropriate financial constraints” were needed for EMR to be seen as credible by markets and ratings agencies. He said the control framework “does provide some flexibility around limits” and that legal obligations “will need to be taken fully into account” in rationing CfDs.

“We are committed to maintaining support levels for existing investments were we have said we would and not to make retrospective changes”, he said.

The letter is set to be published here later today.