End to onshore wind subsidies – killing the ‘green’ goose too soon?

Issues affecting electricity generators and the energy market as a whole.

Following Amber Rudd’s decision to end the Renewable Obligation (RO) a full year early, and indications that she may also scrap the more recent Contracts for Difference (CfD) contracts for onshore wind; we look at the question of whether the Government is killing the ‘green (onshore wind) goose’ too early.
On Monday following her written statement to Parliament dated the previous Thursday 18 June, Amber Rudd addressed the Commons to say that around 250 onshore wind projects were likely to fall outside the grace period announced as part of the government’s plan to end the onshore wind RO a year earlier than planned.

The indications are that an estimated 4GW of new onshore wind will be developed by 2020 taking the UK onshore wind capacity to over 12.3GW. The majority of this new capacity will be supported by the RO while just 0.7GW is due to be supported by the relatively recent CfD arrangements, enabling some 750 projects that are currently in the planning system to make it through the gate into generation. 12.3GW will put total onshore wind capacity in the middle of deployment range set out in the EMR deliver plan whilst remaining within affordability limits, according to Rudd.

But the decision to close the taps on these vital subsidies, effectively shutting down further subsidised onshore wind projects from entering the planning system, is heavily criticised by others that say that onshore wind is the cheapest form of renewable energy available right now and that failing to subsidise it will prevent the UK hitting its EU renewables targets.

Calling time on the CfD for onshore wind will hit Scottish Power particularly hard according to a report in Utility Week this week. It has 130MW of onshore wind projects awaiting planning consent and a further 80MW at planning stage.

The very outspoken Scottish Power Renewables chief executive Keith Anderson argues: “….if you allow onshore wind to continue to compete in the CfD auctions it will drive down the cost of the overall delivery of the programme because it will compete and it will make other technologies more efficient and more effective.
“We can show that onshore wind should be allowed to carry on with CfDs and that by doing that we will make onshore wind as competitive as any other generation technology in the UK - then the Conservatives will still have implemented their manifesto pledge because onshore wind will be competing at the same level as any other generation technology in the UK,”.

The UK is also coming under pressure from the EU who this week cited the UK as one of just five EU members which look set to miss the EU ‘20% of all power generation from renewables by 2020’ target by a significant margin along with France, Luxembourg, Malta and the Netherlands.

Renewable UK’s deputy chief executive Maf Smith added: “With the Paris Climate Conference approaching (in December) we need to make sure all our options are available, and as onshore wind is the least cost way to decarbonise our electricity system, so any early restriction could lead to higher bills for consumers,”
Rudd intends to reform the CfD mechanism in relation to onshore wind when announcing plans for wider CfD allocations in the next few weeks. So what changes are we likely to see apart from onshore wind’s exclusion from these contracts? It is difficult to know at this stage but there is no reason to doubt that DECC’s declared intention of driving towards technology neutral auctions for all carbon generation is the ultimate goal.

What is clear is that onshore wind investment has produced impressive results to date. The onshore wind market now sustains 19,000 jobs nation-wide. It delivers 5.5% of total UK energy and 35% of total UK renewables-based energy. £37bn has gone into the space in the last five years and within the next five years it should be generating 10% of all our energy – powering some 7m UK homes! There is evidence that CfDs are working to boost investment in low carbon energy. We must therefore be careful not to tinker too much with a system which is clearly working well for the UK in helping us reach our decarbonisation targets, while keeping consumer electricity costs down..

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