The Committee on Climate Change has warned that the current package of renewables subsidy cuts proposed by the government pose “major risks” to encouraging investment in low-carbon energy in the long term.
The CCC issued a technical note yesterday discussing the overspend within the Levy Control Framework budget, how it has been calculated differently by associated parties and what the government’s efforts to reduce the overspend could result in.
Warning that there would be “at least three major risks” to investor confidence in the UK, the CCC has said current policy initiatives would hinder cost reduction and industry development; undermine investor confidence in future projects and cause further low-cost opportunities to be missed as additional projects are abandoned.
The Committee has urged the government to follow through on plans to extend the LCF beyond its current expiry in 2020/21 “as soon as possible”. Energy secretary Amber Rudd has previously discussed her intention to do so, however DECC has yet to discuss the plans further.
The note also argued the case for greater transparency and clearer policy within the LCF post-2020, claiming investment to need such clarity due to the longer lead-time and planning cycles associated with power projects.
“For an extended LCF to be an effective signal of the future low-carbon market it will need to be well-specified. That includes a clear understanding of the assumptions on which it has been set and how the Government will respond if the final outturn is different.
“For example, the presumption should be that if carbon prices turn out lower than expected, the LCF will be increased to compensate – this would preserve the low-carbon market, while still resulting in lower costs for consumers,” the note read.
It builds on evidence provided by CCC chairman Lord Deben and chief executive Matthew Bell yesterday which criticised “clearly politically-motivated” policy decisions made by the government and pleaded for replacements to the now defunct Green Deal and Zero Carbon Homes initiatives to be “sufficiently robust”.