Energy and climate change secretary Amber Rudd has heaped fresh doubt over the future of the government’s Contracts for Difference (CfD) subsidy mechanism and confirmed there is to be an announcement on the feed-in tariff “shortly”.
Rudd was giving evidence to the Energy and Climate Change Select Committee, which convened for the first time this morning since the Conservative government’s surprise general election victory in May.
When quizzed on the future of the CfD programme Rudd said she was unable to confirm any dates for future allocation rounds and could not provide any assurances that a secondary round – due in October – would even take place.
For the second CfD round to take place in October as planned the Low Carbon Contracts Company – the DECC-owned vehicle formed to manage CfD payments – would need to be alerted of the required budget by 11 August at the latest. Rudd could only comment that she did not expect to be able to make an announcement on the future of CfDs for “quite a while”.
Rudd was visibly uneasy with continued questioning on the prospects for CfDs and was particularly careful with her phrasing, but her refusal to be drawn on any details of the programme will only heap further uncertainty on the UK’s renewable energy industry. The onshore wind industry was also dealt another, albeit expected, blow when the secretary said she “expected” the technology to be absent from all future CfD rounds should they go ahead.
Central to any decision on the future of CfDs is the overspend recorded by the Levy Control Framework. Rudd confirmed that when she first saw the costs involved soon after stepping into her position the LCF was headed towards a spend of £9.1 billion by 2020/2021, some £1.5 billion over budget.
Work is now being done in order to bring spending closer to within the budget and DECC permanent secretary Stephen Lovegrove, also giving evidence to the select committee, said that spending now looked to be on a course to be over the budget of £7.6 billion but within the 20% headroom. Lovegrove added that the department had been surprised by technology “moving far quicker than expected”, and that the LCF was “reliant on a vision of the future that’s inherently unprovable”.
Rudd was equally vague on the future of the feed-in tariff but did confirm that an announcement was to be made “shortly”, with rumours regarding an announcement in the coming weeks refusing to abate. National newspapers have again carried stories on the back of leaks from within the department and the Daily Telegraph reported on Saturday that an announcement could be forthcoming this week.
Lovegrove provided perhaps the biggest hint towards what could be in the pipeline when discussing the current FiT degression strategy and reduction in solar PV technology costs, which he said was evidence of the system working. “Cost reductions happen more rapidly when subsidies exit the system,” Lovegrove said, before suggesting that it was in the time after subsidy cuts that technology innovation is driven the hardest.