The UK government should make clear its views on a subsidy-free market stabilisation model for technologies left out of the Contracts for Difference scheme, according to the latest select committee report to criticise the government’s handling of the renewables industry.
The Scottish Affairs committee (SAC) has completed its report on the renewable energy sector in Scotland and concluded that cuts to subsidies, particularly onshore wind, have disproportionally hit north of the border.
The select committee note that while the Conservatives were elected on a manifesto that included a pledge to cut new subsidy payments to onshore wind, this decision is in conflict with its focus on reducing the costs of renewable technology.
As the cheapest form of low carbon generation, closely followed by solar, SAC believes the decision to pull further support for onshore wind will prevent the further deployment necessary to bring costs down to the point where the technology would be commercially viable without subsidy. The report states:
The evidence is clear that cost reductions are best achieved by consistent support, and uncertain or delayed funding limits the opportunities for costs to be reduced.
The report quotes former energy minister Andrea Leadsom saying that while the government was committed to its manifesto pledge, it has not yet taken a decision on future Contracts for Difference rounds being open to onshore wind.
Speaking in June, she added that the government “are still considering whether there is any way that we can help the [onshore wind] industry.”
SAC has therefore called on the government to end the uncertainty caused by recent policy changes and comments like those made by Leadsom and set out its view on whether a “market stabilisation” mechanism for onshore wind could be introduced, or at least what form of “help” could be provided.
Committee chair Pete Wishart said: “This report considers several policy changes the UK government has made to support for renewables—early closure of the Renewables Obligation for solar and onshore wind, cutting support through feed-in-tariffs, and delaying the next round of Contracts for Difference—which we found have weakened investor confidence in the renewable sector, and put at risk opportunities for future growth.
“We have urged the government to clarify the future support which will be available to the renewable sector, and set out how they will work with the Scottish government to develop a clear, long-term plan that will allow renewable energy to remain a central part of the energy mix.”
This proposal would set a precedent for future support for solar, which like onshore wind has been left out of future CfD rounds in place of less established technologies.
It is unclear what form this mechanism would take, although it is widely believed its aim should be to guarantee a price for the technology at a subsidy-free rate based on wholesale power revenues, with all other additional elements removed. SAC’s report says that this in itself poses a confusing prospect in the context of onshore wind as no form of power plant is currently investable on the basis of the wholesale electricity price alone.
In addition to the CfD judgements made in the report, SAC has heaped yet more criticism on the UK government’s energy policy reset enacted over the last year. It claims the decision to close subsidies was taken without consultation without industry or the Scottish government, placing its goal of generating the equivalent of 100% of its electricity needs from renewable technology by 2020 in jeopardy.
It is disappointing that the Scottish Government’s ambitions in this area appear to have been stymied by actions taken by the UK Government, particularly given the clear evidence we have received about the lack of meaningful consultation with the Scottish Government over these decisions.
The report recommends a clear process of consultation with the Scottish government be put in place to develop future design or amendments of renewable incentives.
Wishart added clarified that the report was compiled prior to the closure of the Department for Energy and Climate Change, which he argues has indicated a troubling shift in the government’s priorities.
“I hope that the Government’s response to our report will go some way to allaying these fears,” he added.