The head of Scotland’s renewables trade body took aim at government proposals to cap revenues from clean energy generators in a bid to reduce the impact of high energy prices on consumers.
Scottish Renewables chief executive Claire Mack said the proposals, unveiled late Tuesday night by the Department for Business Energy and Industrial Strategy (BEIS), were the latest in a series of market interventions that had “incentivised all the wrong things.”
It comes as part of the UK Government’s energy prices bill, which puts measures to help households, businesses and others with energy costs this winter into law.
The new powers proposed by BEIS include measures attempting to sever the link between high gas prices and lower-cost renewables, which have until now pushed up wholesale electricity prices for consumers.
Included is a proposed temporary “cost-plus-revenue limit” which would cap the amount of money green energy generators can make, the design of which will form the subject of a consultation in the coming months.
Addressing the audience of the Floating Offshore Wind conference in Aberdeen on Wednesday, Ms Mack said it was easy to understand the need for government to respond to consumer pain.
Yet she noted that “some of the propositions put forward this morning – the cost-plus-revenue cap for example – [are] yet another example perhaps of a sticking plaster solution on what is actually a pretty broken system.”
She also took aim at restrictions which have curtailed the build out of onshore wind and solar, and the structure of transmission charges which may penalise more remote, large-scale clean energy projects.
“This is a broken system that starts with an ideological NIMBYism which bans some of our cheapest forms of power, then carries on through transmission charges which carry huge penalties for power in some of our most abundant areas of the country, and then ends up with consumers who need more support to enable them to use less gas and electricity as a matter of urgency,” she continued.
“All are issues which trade associations are working very hard on industry’s behalf to talk to government about what the great longer-term solutions are to the issues that we are facing.”
Ms Mack said the government must “keep the long game in mind” here and ensure that all policies work towards “a long term solution” that encourages investment in clean energy and the lowest-cost power sources.
Meanwhile, the sector has already said the move would act as a “de-facto windfall tax” above a certain level.
Discouraging investment
BEIS has said the new proposals aim to ensure consumers pay a fair price for low carbon energy and has the potential to save billions of pounds for British bill payers. At the same time it will allow generators to cover their costs, and receive an “appropriate revenue”.
The limit will apply to England and Wales initially, but BEIS said it was liaising with the Scottish government to confirm whether it would be extended north of the border.
However, Ms Mack suggested the cap was part a series of interventions that had worked counter to the long-term aims of price-lowering and decarbonisation.
“The fixes in the power market to date have unfortunately incentivised all the wrong things They have exacerbated climate change and created an enduring reliance on volatile fossil fuels,” she continued.
Utility SSE took a similar line, noting in a statement on Wednesday that: “Any revenue cap must be set at a level that doesn’t discourage essential investment in the UK’s renewable energy sector and therefore should be comparable to other countries, particularly given the €180 cap being implemented by the EU.
“After all, the key lesson of the current energy crisis is the need to bolster our homegrown energy defences.”
SSE said it was also “vital” that the cap did not negatively impact the UK’s security of supply this winter, and therefore flexible technologies, such as hydropower, that require strong price signals to meet demand when most needed should be excluded.
Ms Mack said the clean energy sector would need to attract £175 billion worth of investment into domestic wind power over the coming years, and that markets were already “in turmoil” across the EU in response to the proposed price cap.
“Before enacting this cap government needs to think very hard about the outcome it wants,” she added.
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