I’m trying to fathom out what the changes to low carbon subsidies sneaked into the Tories’ latest UK Budget really means.
The Maybot Administration appears to be turning its back on renewables by announcing no new support for projects post 2020 until 2025 and a freeze on carbon taxes.
However, it seems that the cut would not prevent developers from signing contracts for new schemes coming online after 2025, the implication being that subsidies would restart, though I rather doubt that will ever happen. Once they’re gone that will be it.
Given the energy transition that is clearly underway across much of the planet as cleaner, greener, cheaper energy wins ground over dirty carbon, this Treasury idea would appear to a bad move.
Or is it? Might it in fact fuel an even greater determination by the UK’s now significant renewables community to push ahead and keep the pendulum of energy change swinging?
That’s possible, IMO.
Don’t forget, solar energy capture and onshore wind were stripped of their subsidies several years ago and can stand on their own two feet successfully; especially the former.
The damage this time will instead basically be inflicted on offshore wind, wave and tidal. And then mostly wave and tidal as offshore wind is making huge strides in terms of slashing the unit cost of turbine manufacture, installation and reliability.
To remind; in January this year, a new report by the UK’s Offshore Wind Programme Board (OWPB) analysing costs of offshore wind showed they had fallen below the £100/MWh (€116/MWh) target four years early.
The report, compiled by ORE Catapult for the OWPB, said technology developments and increased competition among developers have contributed to the fall, despite a lack of collaboration between said developers.
In March the UK’s progress was reinforced in a report published by the International Energy Agency’s Renewable Energy Technology Deployment programme (IEA-RETD).
Cost reduction of 60% from 2010 to 2017 indicated that European industry targets for 2025 had been exceeded 8 years ahead of schedule,
It also highlighted the importance of effective policy in stimulating deployment and driving cost reduction. Without realising it, perhaps this latest decision by a Tory Administration will help, ironically.
Why? Because it could serve to push the offshore wind industry to achieving the self-sufficiency that it is now remarkably close to.
There are currently over 5GW (5,000MW) of consented and therefore subsidy-eligible offshore wind projects in the UK pipeline that will more than double our offshore wind capacity by around 2025.
But when it comes to wave and tidal, the Tory decision may be disastrous as both are a long way behind offshore wind.
Tidal is effectively at demonstrator stage though the MeyGen project in the Pentland Firth is intended to become commercial. Wave is nowhere near even that with hopes seriously damaged by the Pelamis project debacle.
I believe that neither tidal nor wave can make proper progress without sustained support. Stop-start aid is a stupid road to venture down.
It has already been reported that the decision could finally wreck the proposed £1.3billion Swansea Bay tidal lagoon project, which has suffered badly as a result of government vacillations spanning literally years.
The revelation that there will be what will in effect be a subsidies moratorium has already generated speculation that this could dash hopes for pioneering projects such as the proposed and much delayed £1.3bn tidal lagoon in Swansea, which has a mooted launch date of 2022.
The Treasury, which is a law unto itself here in Britain and believes itself to be answerable to no-one, claims to have taken the decision to “protect” consumers and industry. Us!
Why? Because we would otherwise face an annual cost of about £9bn on our collective energy bills to pay for wind, solar and nuclear subsidies to which it had already committed. And the cuckoo in that particular nest is the staggeringly expensive £20billion-plus Hinkley Point nuclear disaster, a project that should never have been allowed.
In essence, what the tottering Maybot Administration has decided to do is chop any new renewables subsidies until 2025. It has simultaneously announced plans to replace the Levy Control Framework (LCF) with the Control for Low Carbon Levies (CLCL).
The LCF was intended to control the costs of supports for low carbon power paid through consumers’ energy bills.
Its CLCL replacement is to monitor all existing and new low carbon electricity levies but not look to cap spending or set a budget. This new mechanism does not rule out future support for any technology, we are assured.
At least the Maybot Administration has pledged that all existing contracts and commitments will be respected, including the up to £557m allocated for further CfD (Contracts for Difference) auctions as set out in the Clean Growth Strategy announced in October.
Anything outwith existing and future CfDs, the Renewables Obligation and feed-in tariff schemes is classed as a new levy and the Treasury claims that the “burden” of support costs is unlikely to fall until the middle of the next decade.
Naturally, environmental groups were quick off the mark with their comments. Greenpeace branded this Budget as among the “least green budgets ever because there will be no new money for renewables until at least 2025”.
I am struck as to just how muted … measured … energy industry trade groups were in their criticism of the changes. It’s almost as if they were unsurprised at the announcement, despite the fact that the cut appears to fly in the face of the spirit of the much vaunted Clean Growth Plan.
RenewableUK chief executive Hugh McNeal said: “The renewable energy industry has a little more certainty than it did this morning (November 22).
“While this is welcome, what is missing is the ambition to take full advantage of the UK’s global-leading renewables industry at such a crucial time for our country.”
Errr, what does he mean by global-leading renewables industry?
I’ve long been on record as saying that the global leadership claim is false. Yes, we’re brilliant at planting turbines and clagging solar panels on rooftops and carpeting agricultural land with them but there’s precious little innovation as practically everything needed is designed, manufactured and imported from elsewhere.
We even struggle to do the grunt stuff like towers and offshore turbine jackets of the kind that tottering Burntisland Fabrications down in Fife builds.
As for tidal and wave, the best technology bets developed in these islands are already mostly in foreign hands.
Say no more.
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