Wind developers are exploiting a subsidy loophole, report claims

Small scale wind developers are cashing in on a subsidy loophole by under-estimating the capacity of the installed turbines to take advantage of a scheme designed for low-capacity projects, claims thinktank IPPR.

In a new report the IPPR claims that developers are able to under-report or ‘derate’ the capacity on wind power projects in order to qualify for the feed-in tariff designed for projects generating at between 100–500kW.

“By installing derated turbines, developers are making larger profits off a feature of the scheme that was designed to support small-scale projects,” the report said.

“Each derated turbine will earn £100,000 in ‘excess subsidy’ each year, or £2 million over its 20-year lifespan. This means that, by September 2014, the British billpayer was already committed to £175 million in excess subsidy payments on derated turbines,” the report added.

A Government spokesman refuted the findings saying the numbers “don’t add up”. Nonetheless, the spokesman said the the issue is under “constant review” with an in depth investigation into the subsidy levels currently underway. 

“We will take any action necessary if wind developers are found to be unfairly exploiting the FiTs scheme,” the spokesman said.

The thinktank has called on government to adjust its feed-in tariff for small-scale wind to close the current loophole.

First, a turbine’s subsidy band should be determined on the basis of rotor size rather than capacity with an overall cap on how much a project can receive in subsidies also established, the thinktank said.

In addition, the thinktank has called on government to put in place a new subsidy band, to reduce the difference between the higher-paying, lower-capacity band and the lower-paying, higher-capacity band, “which currently incentivises developers to exploit the loophole we’ve identified”.