UK Coalition criticised after renewables decision delay

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By Bob Duncan

The UK Department of Energy and Climate Change (DECC) has come under fire for delaying an announcement on subsidy levels for renewable energy projects, which had been expected yesterday.

The DECC was due to announce the outcome of a review into renewable obligation certificate (ROC) banding, a system which obliges electricity companies to buy a certain amount of their electricity from renewable sources.

In a statement, the DECC said: “We will not be making an announcement today. We will bring forward the proposals in due course as we are discussing and finalising the details.

“We are committed to supporting renewables as part of our energy mix, and will continue to work hard to finalise the detail for the ROC subsidies at the earliest opportunity, but, it is important to get the levels right, and base these on evidence.”

It added: “The renewables sector is crucial for sustainable economic growth, supporting jobs up and down the country, attracting inward investment and helping us to reduce emissions in order to tackle climate change.”

The Renewables Obligation (RO) places a mandatory requirement on licensed UK electricity suppliers to source a specified and annually increasing proportion of electricity they supply to customers from eligible renewable sources or pay a penalty.

The scheme is administered by Ofgem who issue Renewables Obligation Certificates (ROCs) to renewable electricity generators for every megawatt hour (MWh) of eligible renewable electricity they generate.

Generators sell their ROCs to suppliers or traders which allows them to receive a premium in addition to the wholesale electricity price.  Suppliers present ROCs to Ofgem to demonstrate their compliance with the obligation. Where they do not present sufficient ROCs, suppliers have to pay a penalty known as the buy-out price.

The UK Government has confirmed there will be no immediate announcement on the level of ROC subsidy which renewable energy projects can expect to receive through to 2017.

It had been widely expected that the announcement on ROC banding would be made before the start of Parliament’s summer recess, which began at the close of yesterday’s business. bThat will now not happen, although a DECC spokesman said it would be wrong to conclude that meant waiting until MPs return in the autumn.

“The intention is that we will do it as soon as we can but we haven’t got a date for that yet,” said the spokesman. “It could happen during recess, however, as it doesn’t necessarily have to wait until the House reconvenes in the autumn.”

On the reason for the delay, which many say has already caused renewable energy investment to stall, he added merely that discussions are continuing in terms of finalising the announcement, so that’s where we are”.

The delay has reignited speculation that DECC is at loggerheads with the Treasury department over the subsidising of onshore wind farms, with the mainstream UK press reporting last month that finance minister George Osborne had called for the proposed 10% subsidy cut for onshore wind power subsidies to be increased

UK Energy Secretary Ed Davey admits discussions over crucial changes to the nation’s renewables obligation (RO) banding are still going on inside Britain’s coalition government – but denies that support cuts of 25% are being considered for the onshore wind sector.

The delay on RO banding comes against the background of a damaging row between the DECC and the UK Treasury, led by Chancellor of the Exchequer George Osborne, over the level of support for onshore wind, with Osborne – a Conservative – reportedly pushing for a cut of up to 25%.

But Davey – a member of the Coalition’s minority Liberal Democrat faction – told the Committee: “I think I can happily say on the record that there is no one in government arguing for the kind of cuts you have seen in the newspapers of 25%.”

He said of the RO review: “We have been working hard to conclude it. The crucial thing is that when we do come out with it we can explain it and justify it.”

Pressed on the reason for the delay by Committee chairman Tim Yeo, Davey said the DECC has “reached some proposals to put to rest of government, and we are discussing these with rest of government” – suggesting the issue is still not settled.

Renewable Energy Association chief executive Gaynor Hartnell has already hit out at the delay, saying: “Those within DECC know that this delay is immensely damaging to the industry and will be seeking to resolve things as rapidly as they can.  Developers need certainty and soon.

Maria McCaffery, Chief Executive of RenewableUK, said: “Any further delay in an announcement could have a devastating impact on investor confidence, job creation and the deployment of clean energy. It would be unacceptable if the decision were to be delayed until September – especially as the new banding levels are due to come into force just seven months later, in April 2013.”

“This delay is the most serious yet. It does not bode well for the schedule for electricity market reform, which is far more complex.”

Labour’s shadow energy minister, Tom Greatrex, claimed investment in clean energy would grind to a halt unless ministers “end the dithering”. Mr Greatrex claimed the decision had been delayed because of rows in government.

“Scotland’s green businesses are crying out for certainty,” he said. “Unless ministers end the dithering and get their act together, investment in clean energy will grind to a halt and jobs and growth that could come to Britain will go overseas.”

Scottish Power also expressed concern, arguing that sticking to the timetable was key to investor confidence. Chief corporate officer, Keith Anderson, said the company was worried by reports of the delay in announcing the outcome of the ROC banding review.

“One of the key advantages of the UK as a place to invest is the predictable nature and stability of its regulatory regime,” he said. “Sticking to the evidence and the timetable is key to investor confidence.

“We know that maintaining support for relatively inexpensive onshore wind is likely to be the best option for customers, and we see no reason why an outcome can’t be agreed before the Olympics begin.”

James Dickson, a partner with Scottish law firm bto, said the delay would have a “significant impact on many projects”. He added: “The lack of certainty as to available subsidies for renewables projects means that a lot of investment and funding decisions could be delayed and orders for equipment not placed.”

According to the Scottish Government, provisional figures from the Department for Energy and Climate Change (DECC) show that renewable electricity generation in Scotland was 4,590 gigawatt hours (GWh) in the first quarter of 2012, up 1,435 GWh on Q1 2011.

Responding to the news that renewables output has reached record levels, Jenny Hogan, Director of Policy at Scottish Renewables, said:

“These latest figures show yet again that renewable energy is becoming an ever important part of our energy mix.

“Renewable electricity sources – mainly onshore wind but also hydro, biomass and other technologies – are delivering power to homes and businesses across Scotland.  Each time you boil a kettle in your home, more and more of that electricity will have been generated from a renewable source such as a wind farm.

“Not only does the renewables industry now employ more than 11,000 people in Scotland, it’s helping to reduce our carbon emissions, tackle climate change and insulate us from volatility in the gas market which has been responsible for the major hikes in energy bills over the last few years.”

Britain requires heavy investment in renewable energy to meet its target of generating 15% of its energy consumption from renewable sources by 2020.

The Scottish government has set a much more ambitious ambitious target for the equivalent of 100% of Scotland’s electricity needs to come from renewables by the same date.

The UK Department of Energy and Climate Change has issued revised statistics for 2011 which showed that renewable electricity generation in Scotland was 13,735 GWh in 2011, an increase of 44.3% from 2010 and up 97.3% from 2006.

The Scottish government said that, assuming gross consumption in 2011 was similar to 2010, about 35% of Scotland’s electricity needs came from renewables in 2011, beating its interim target of 31%.