Overblown? Why Rudd’s onshore wind cuts aren’t as deep as they seem

The Conservative’s energy manifesto was clear: the party, if elected, would halt the spread of onshore wind by removing financial support and giving local communities more power to oppose planned projects.

And energy secretary Amber Rudd wasted no time in pushing the pledge through, this week taking aim at the Renewables Obligation (RO) with plans to scrap the scheme by April next year and sparking an outpouring of condemnation from green associations and political groups which was as rabid as it was predictable.

But the view from those closer to the investment decisions is entirely different: although not quite business as usual, the government has offered a 5.2GW loophole technically large enough to ensure onshore wind capacity will increase by as much as 50 per cent by the end of the decade, just as many investors always predicted it would.

Not since Labour’s 2013 price freeze pledge has an energy policy gained so much attention for so little direct industry impact.

Currently the UK has almost 9GW of onshore wind capacity already installed and contributing around 10 per cent to the UK’s electricity generation mix. By the end of the decade investment data from advisory Baringa predicted that the UK would reach the 13GW mark with a further 9.5GW to come from offshore wind projects.

In a statement to the House of Commons, Rudd said that even when taking into account the early closure of the RO for onshore wind, the UK will have 11.6GW of onshore wind supported by the mechanism, alongside 0.75GW supported by contracts for difference (CfD) by the end of the decade, just shy of Baringa’s original predictions.

“This puts us above the middle of the range set out in the EMR Delivery Plan, our best estimate of what we would need to meet our 2020 targets,” Rudd said.

And other utilities analysts tend to agree.

Following the news, RBC Capital told investors: “In reality it will make little difference to the sector with the grace period ensuring that most projects that would have been online by April 2017 – when the RO scheme was originally slated to close – still likely to be developed. Beyond April 2017, competitive onshore wind projects can still be developed under the auctioning process in the CfD regime.”

Baringa partner Phil Grant echoed the view, telling Utility Week that “the initial headlines with respect to the RO are bigger than the actual impact these changes will have. The grace periods are critical for this – making the impact on onshore wind rollout marginal.”

The 5.2GW grace period reflects the capacity which already has planning permission. In addition projects require a grid connection offer and acceptance as well as evidence of land rights to be eligible. Of those with consent, some projects have already begun construction, some fall in Northern Ireland where energy policy is devolved and some include small-scale installations. The government estimates that in reality only 2.9GW of the over 5GW of planned will take up the grace period offer.

“Most of the onshore wind projects that are in the pipeline are not going to be affected by this – although it is very difficult to tell,” EY partner Ben Warren tells Utility Week.

And Rudd’s work on onshore wind is by no means over. So while the RO may have threatened more than it delivered, a change to the CfD structure could still deliver a body-blow to the industry.

“There isn’t full clarity on this issue yet,” says Grant.

“It’s not clear quite what this means for projects under a CfD regime – there are mechanisms available to government not to give any funding to onshore wind under the CfD rule but we will know more when the budgets and technology maxima are announced for the next CfD round.”

But Warren’s larger concern is the political furore surrounding onshore wind, and how the nature of the debate may impact the wider renewables context.

“It is unhelpful and entirely the wrong angle for government to be taking by saying subsidies will be cut to reduce costs while supporting more expensive options. It’s disappointing that a newly formed government is still plying the same rhetoric and same messaging of it,” Warren said.

It seems the politicians might be playing on a different political pitch, but the football remains the same.