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Government is “rebalancing” renewable power subsidies in favour of offshore wind, it revealed on Wednesday.
Onshore wind and solar generators will get a lower “strike price” for their power than under June’s draft figures, to leave more in the pot for offshore windfarms.
The starting strike price for offshore wind is still pegged at £155/MWh, but it will drop less steeply than previously advised to £140/MWh in 2018/19, instead of £135/MWh. Onshore wind will get £95/MWh, falling to £90/MWh; while large scale solar PV receives £120/MWh, coming down to £100/MWh.
The changes allow the offshore wind sector to deploy 10GW by 2020 and attract an extra £40 billion of investment in renewable electricity generation projects, according to the Department of Energy and Climate Change.
Meanwhile, 16 renewable projects totalling 8GW are a step closer to getting contracts, having passed to the next stage of the Final Investment Decision Enabling scheme.
Energy secretary Ed Davey said: “This package will deliver record levels of investment in green energy by 2020. Our reforms are succeeding in attracting investors from around the world so Britain can replace our ageing power station and keep the lights on.
“Investors are queuing up to express their interest in these contracts. This shows that we are providing the certainty they need, our reforms are working and we are delivering ahead of schedule and to plan.
“With sixteen new major renewable projects progressing in our “go early” stage we are delivering ahead of schedule and are able to begin the move to the worlds first low carbon electricity market faster than expected.”
Renewable UK welcomed the “more realistic” level of support for offshore wind but warned lower onshore rates meant “some smaller projects such as community led schemes will be lost”.
The subsidy shift has been interpreted in some quarters as a politically motivated curb on onshore and solar growth.
Maf Smith, deputy chief executive at Renewable UK, said: “If this cut has been made for political reasons rather than economic ones that would be a worry. All politicians need to understand that uncertainty spooks investors and it is the consumer who bears that cost. Voters support the development of on and offshore wind, so we now need a period of calm and consistency from government.”
However, the Renewable Energy Association (REA) hailed it as evidence the government and industry were succeeding in bringing renewable costs down.
Nina Skorupska, chief executive of the REA, said: “The spin in Westminster and the media today is disappointing but not surprising. Today is actually a good news day for renewable electricity and renewable heat. The real reason that support for solar and onshore wind will go down is that they are leading the race for cost-competitiveness with fossil fuels. Government policy is working and bringing down costs. The important thing is that decisions are evidence-based, not purely political, and we need to see the methodology to assess that.”
This was echoed by Greenpeace, which noted that it puts renewables on track to be cheaper than nuclear power from Hinkley Point C at £92.50/MWh. Chief scientist Doug Parr said: “Today’s cuts to onshore wind and solar support schemes show how quickly the cost of clean energy technologies are falling. Onshore wind farms will power our homes and factories more cheaply than new nuclear stations and the same is expected of solar.
“Given the increasing affordability of these renewable energy sources, it’s right ministers should now put emphasis onto helping drive down the cost of offshore wind so that the UK can reap the rewards of new turbine factories and thousands of new jobs.”
The Solar Trade Association said its members had been prepared to go accept deeper subsidy cuts in the medium term. Chief executive Paul Barwell suggested government was trying to “spare nuclear’s blushes” by giving solar a higher strike price. He added: “The negative political rhetoric about solar farms is a shame given the announcements today show good support for solar after 2015. The strike prices clearly show this is a technology on track to compete with fossil fuel prices.”
Manufacturers’ association EEF bemoaned the fact cuts to onshore wind and solar rates were being reallocated instead of passed on to customers, however. Gareth Stace, head of climate and environment policy at EEF, said: “With energy bills already rising, industry will be disappointed that the reduction in subsidies for mature technologies such as onshore wind hasn’t translated into a cut in the cost of the overall programme. In particular, the future path for offshore wind strike prices raises question about existing commitments to drive down their costs.”
Gaynor Hartnell, independent consultant and former chief executive of the REA, said tweaking the prices would not solve the “complete mess” of plans for allocating contracts.
She said: “There is acute pressure on getting value for money. If they have got the price wrong on solar and onshore wind, surely the right reaction is to introduce competition sooner rather than later.”
The final Electricity Market Reform delivery plan, due to be published later this month, will give further details on the terms of renewable contracts.
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