Renewable energy projects still offer a viable investment opportunity to landowners and developers despite government cuts to Feed-in Tariff support, according to a leading energy consultant.
Nick Green from Savills Energy says the latest reduction in FiT payments rates for non-solar PV installations, announced by industry regulator Ofgem last week, should not act as a deterrent to investing in renewables.
“Overall, the degression rates have been broadly in line with expectations and in some cases less severe than anticipated,” said Mr Green.
“Renewables projects remain a viable opportunity for landowners and developers looking to invest. With a stable rate of degression, payback time will only increase marginally – we’re talking a few years, rather than decades, with room still for good return on investment.”
Under the new tariffs, support for hydro schemes up to 2MW in size has reduced by 5%, while wind schemes and anaerobic digestion plants under 500kW in size has seen a 20% reduction.
Mr Green said the reduction in subsidy support levels will result in only the best projects getting off the ground, with many medium-scale wind projects unlikely to go ahead.
“Such a reduction [20%] will result in many low or average wind resource sites not proceeding and where they are let, rents may start to come under pressure,” he said.
He said the hydro industry would now be “breathing a sigh of relief” that it had not been given a larger cut in subsidy support.
“Considering the lead-times for such projects, a large reduction in FiT could have severely impacted the development pipeline we have seen spring up across Scotland and Wales in particular and we may have seen it start to dry up,” said Mr Green.
“At just 5% degression on projects up to 2MW and no reduction on larger projects, however, there is stability for developers to continue to ivnest in schemes to unleash the extensive hydro potential in the UK.”
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