RenewableUK cautious over Govt’s mixed funding signals

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RenewableUK, the country’s largest renewable energy trade association, has welcomed the Government’s commitment to boost financial support for wave and tidal projects.

  • Welcome boost in financial support for wave and tidal energy projects
  • Industry already working with government to ensure cost reductions
  • Cuts in support for wind industry will have impact on deployment

However, RenewableUK is urging caution over the Government’s plans to downgrade the level of financial support it provides for onshore wind from 2013 onwards, and offshore wind from 2015.

Maria McCaffery, Chief Executive of RenewableUK, said:

“Any reduction in financial support will have an impact on the industry, reducing deployment, and potentially jeopardising momentum as we strive to reach our carbon reduction targets. However, we recognise the need to drive down costs across the sector, especially offshore.

Any changes need to be carefully balanced as the proposed onshore reduction would have a disproportionate impact on small community-based wind energy projects, as they don’t enjoy the economies of scale which larger projects can harness”.

The consultation on banding levels for Renewables Obligation Certificates (ROCs), announced by the Department of Energy and Climate Change, proposes lowering the amount of support which onshore wind generators will receive from 1 ROC per megawatt hour (MWh) to 0.9 of a ROC. For offshore wind, the support level would be reduced from 2 ROCs to 1.9 ROCs from April 2015, and to 1.8 ROCs in April 2016. Wave and tidal projects will receive 5 ROCs, with no overall cap.

Research by RenewableUK shows that this cut of 0.1 of a ROC for onshore wind could reduce deployment from 12 gigawatts (GW) to 10.4 GW by 2017.

The lost 1.6 GW could have provided electricity for nearly a million homes.

A reduction of 0.2 of a ROC for offshore wind in 2016 would make more projects in the ambitious Round 3 marginal. Developers are already seeking cost reductions to make them viable under the current 2 ROC banding.

Consumer bills are likely to remain unaffected by these changes. In the average annual domestic electricity annual bill of £5811, the total cost of the RO is just £20. Wind receives less than half of that £20 (or 1.8% of current consumer bills). By 2017, the RO will cost some £50 with the cost of supporting going up to around £30 a year or 60p per week, which would be the equivalent of 5.2% of electricity bills if other fossil fuels remain flat.

McCaffery added:

“We are determined to continue working with Government to ensure that the industry is operating as efficiently as possible by reducing our costs, not least through the Offshore Wind Cost reduction taskforce.

The measures to support Wave & Tidal energy are particularly welcome and will help build a domestic market big enough to drive innovation and lower cost. Onshore Wind is already the least expensive form of renewable energy on a mass scale and is currently providing the largest share of renewable electricity. These measures must not put its future deployment in doubt”

1 NERA Economic Consulting – Energy UK – Energy Supply Margins: Update June

RenewableUK is the trade and professional body for the UK wind and marine renewables industries. Formed in 1978, and with more than 700 corporate members, RenewableUK is the leading renewable energy trade association in the UK. Wind has been the world’s fastest growing renewable energy source for the last seven years, and this trend is expected to continue with falling costs of wind energy and the urgent international need to tackle CO2 emissions to prevent climate change.

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