Investment in renewables (UK) may get hit despite rise in wind farm subsidies
Subsidies for wind farms, added to the bills of energy consumers, will rise by nearly 10% from next year under the government's reforms of the electricity market. But uncertainties under the new regime, detailed on Thursday, may mean renewable energy companies still find it impossible to invest. The government has not reached a deal with the nuclear operator EDF on what level of support it should receive from energy bill payers for new reactors, but ministers promised a loan guarantee programme that could be worth £10bn.
Wind turbine operators and manufacturers have been holding off on tens of billions of pounds of investment in the UK, over fears that subsidies would be cut to unsustainable levels. The draft subsidy level – the "strike price" – will be £155 per megawatt hour for offshore wind farms from 2014, falling to £135 in 2018. For onshore wind farms, which are cheaper to build and run, it will be £100 falling to £95 in 2018. That compares with prices of about £90 per mwh for onshore under the current subsidy system, and about £130 for offshore wind, under the current Renewables Obligation, which runs to 2017.
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But the new "contracts for difference" will run for only 15 years, compared with 20 years under the old system, and this will reduce investor certainty and their appetite for pouring billions into the UK's green economy, renewables experts warned. Maria McCaffery, chief executive of RenewableUK, which represents wind companies, said: "The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under contract for difference system compared to the Renewable Obligation. However, more details need to be set out. The most important ingredient remains investor confidence and that will take time to land. The secret is consistent long term support and investors seeing that government is behind renewables and low carbon generation for the long term."
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government is firmly opposing a proposed EU-wide target on renewable energy generation for 2030. Clean energy experts say this would spell disaster for investment, because the certainty provided by the current EU target – of generating 20% of energy from renewable sources by 2020 – has been key to spurring the development of alternative energy, which in turn has brought down costs and made low-carbon electricity more competitive with fossil fuels.
http://www.guardian.co.uk/environment/2013/jun/27/windfarms-renewable-energy-subsidies
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