Over the summer we documented the policy changes of the UK government regarding renewable energy; the Renewable Obligation, Contract for Difference, the Feed-in Tariff, and pre-accreditation have all either been scrapped or reduced so vastly that is unlikely they will have any further positive effect on the industry.
Primarily this will mean a lack of clean renewable energy for the country plus an uphill battle to reach our decarbonisation targets in 2020. In addition there are several other ways in which these changes will affect the industry in particular and the country in general.
Investor confidence in the industry is now at an all time low after a major new survey ascertained that lending to key green projects was now being withheld. The survey run by EY and commissioned by Scottish Renewables confirmed that banks were now reluctant to finance renewable energy projects.
Senior Policy Manager for Scottish Renewables Michael Rieley said: “The UK Government’s decision to remove financial support for some onshore wind farms a year earlier than planned has had a clear and negative impact on the ability of developers to attract finance to their projects.
“Our members have already expressed concern that they were entering an investment hiatus and this survey of lenders would indicate their suspicions are well founded.
“With the decision to end support a year earlier than planned, around two gigawatts of onshore wind projects in Scotland have been put at risk. These are projects that could bring around £3 billion pounds of investment and provide enough generation to meet the equivalent electricity demand of 1.2 million Scottish homes.
“If we are to avoid losing the benefits of this scale of development in Scotland, the UK Government must allow those developers that have already made significant progress with their projects to continue them as part of the Renewable Obligation scheme.”
Matthew Yard, Assistant Director at EY, said: “The results of the survey indicate that raising project finance for UK onshore wind RO projects has become more complex, more expensive and increasingly difficult since the announcement of the early closure of the RO. Those banks that have indicated they are considering lending to UK onshore wind RO projects are now seeking better terms and some form of mitigation against a situation with no RO revenue.
“As we move closer to the RO accreditation end date, the ongoing uncertainty makes it harder for projects and sponsors to raise senior finance.”
WWF Scotland director Lang Banks added: “This survey provides further evidence that the UK Government’s energy plans are damaging investor confidence in the cheapest form of renewable technology.
“And, it’s not just investment and jobs that are at risk by their reckless policies, but our ability to cut carbon emissions. Even the Government’s own analysis shows that an early ending of support for onshore wind could drive up power sector emissions in the UK by up to 63 million tonnes.
“If the UK wants to be able to claim to be any kind of leader at the forthcoming UN climate talks, then it urgently needs to start setting out how it will meet its climate and renewables targets.”
In turn this will leave a number of companies within the industry with no option other than to shut down putting as many as 5,500 jobs at risk in Scotland alone.
Jenny Hogan, director of policy at Scottish Renewable said: “Scottish Renewables is deeply concerned that the UK Government’s recent announcements will have a disproportionate impact here, both on jobs and investment, as well as our ability to meet our climate change target,” Hogan said.
“Is the industry safe and secure? I think the short answer is no. The reason why we believe that is because of the way this is being done. To completely take the support scheme away so quickly is avoiding the chance for the industry to continue on its trajectory of reducing costs. This is really just pulling the rug from under the industry’s feet.
“On a regular basis our members and other companies are telling us that they are having to make redundancies, some are even at risk of shutting up shop altogether.”
A DECC spokesperson said: “We are still on track to deliver at least 30% of our electricity from renewable sources by 2020. Government support has driven down the cost of renewable energy significantly and, as costs continue to fall and we move towards sustainable electricity investment, it becomes easier for parts of the renewables industry to survive without subsidies.
“Our priority is to get the best deal for hardworking bill payers and our policies aim to keep energy bills as low as possible.”
However the government has since admitted that abandonment of the subsidy support could add as much as 63 million tonnes of CO2 in emissions and save just 30p on consumers’ annual electricity bill.
An impact assessment from the DECC, published as part of a package of documents for the new Energy Bill, show that lifetime CO2 emissions could be up to 63MtCO2e higher than they would otherwise have been, the estimated total lost benefit to communities will be around £1m a year, and there will be around a £0.30 (0.05%) reduction on the average annual household electricity bill.
Senior Policy Manager at Scottish Renewables Michael Rieley said: “We have consistently argued that this policy can only hinder the UK’s efforts to meet binding climate change targets, and the government has now admitted their decision could increase the UK’s carbon emissions by 63 million tonnes.
“The decision to close support for onshore wind has caused a ripple effect of uncertainty throughout the renewables industry, removes one million pounds a year from local communities and may only end up saving 30 pence on the annual household electricity bill.
“What we need now is for the UK Government to set out fair and reasonable grace periods as soon as possible for those projects that will fall out with the scope of this decision.”
Dr Richard Dixon, Director of Friends of the Earth Scotland, added: “These figures show that the UK Government’s ideological crusade against wind farms will increase carbon emissions by considerably more than Scotland’s annual total emissions and cost communities a million pounds in lost payments, all to cut just 30p off consumers’ bills. It is hard to see how the UK will avoid the dunce’s corner at the UN climate conference in Paris in December.”
Finally, according to the Renewable Energy Association, removing the Feed-in Tariff could result in a net loss to the Treasury compared to the proposed budget for the scheme over the next three years.
They conclude that if the proposed cuts result in the loss of 15,000 jobs then the net loss to the Treasury would be £94m which is approximately the same as the budget cap for the project. They added that this does not include loss of business rates for local councils and VAT and corporation tax income to the Treasury.
James Court, REA head of policy & external affairs said: “The 15,000 job loss assumption is conservative given the projected 25,000 job losses expected by some in the sector.”
They also stated that they agree with the government that the UK solar industry should be able to continue without subsidy in the long term however are concerned that support is needed in the short term.
Mr. Court added: “The REA is disappointed however that after a decade of government support leading to dramatic technological improvement and cost reduction, the solar industry is now in danger of being tripped at the last hurdle when it is so close to standing independently.
“The government’s sudden reversal of support for solar and other emerging renewables technologies ignores the substantial benefits that a healthy renewables industry provide to UK employment and the public purse.”
The fallout from the government’s policy changes on renewable energy will be felt for years to come. So much so that it would not surprise us if at some point in the future, when we are so far behind on our decarbonisation targets, and the price of gas imports so high that we return to subsidise renewable energy.
However by then we will be so far behind it will take several more years to make up the lost ground, bring our carbon output down to safe levels and create a secure clean energy future for all. The decision to switch off renewable energy now makes no environmental or economical sense, it is purely political and has no bearing on public opinion.
Over the next few weeks we expect a raft of challenges to these policy changes from the industry and other organisations. Whether they have any success will remain to be seen however it is our hope that this will help strengthen pro-renewable public opinion giving the government an opportunity to see the bigger picture and reverse their decisions.