This week the Government published its long awaited Response to the Renewables Obligation Banding Review consultation. Reaction from the renewables industry has been mixed. Not unexpectedly there have been some winners and some losers but the real concern remains the continuing lack of certainty over support levels - particularly in the onshore wind and solar PV sectors.
The onshore wind sector must have breathed a cumulative sigh of relief with confirmation that the cut in support would be 10% (a support level of 0.9 ROCs per MWh) rather than the 25% cut that had apparently been hinted at. But it is unlikely that the champagne corks will have been popping. Whilst in theory the level of support remains in place for new accreditations and additional capacity added in the period to 31 March 2017, it is subject to a very large caveat.
The Government is to undertake a call for evidence to examine the costs of onshore wind, reporting back to ministers in early 2013. If the evidence suggests that there are grounds for a further review of support levels it will initiate one immediately.
Accepting the uncertainty this is likely to create, the Government has confirmed that any changes in support following any review would not take effect before April 2014. Additionally, its now well established principle of 'grandfathering' will apply to projects accredited before the date any change in support took effect. Indeed, it has felt the need to go further, stating that it would expect (subject to consultation and State Aid approval) to preserve the levels of support available to those projects where "significant financial commitments" have been made to those existing at the date of any change. The concept of "significant financial commitment" is sure to be fertile ground for further discussion.
So, possibly only a temporary reprieve at best for onshore wind. Certainly good news for those projects which are capable of being built and accredited before 31 March 2014. But for those where there is a risk that the deadline will not be met, uncertainty when considering investment decisions remains.
Developers of onshore wind projects of 5MW or less will also have noted that the Government intends to consult on excluding them from support under the Renewables Obligation, leaving them to be supported under the feed-in tariff regime.
The position in relation to solar PV is even less certain than that for onshore wind. The Banding consultation had proposed maintaining support for solar PV at 2 ROCs per MWh until 31 March 2015, stepping down to 1.9 ROCS per MWh for new accreditations and additional capacity added in the period 1 April 2015 to 31 March 2016, and 1.8 ROCs per MWh from 1 April 2016 to 31 March 2017.
However, the Government has had a rethink in light of evidence from the feed-in tariff comprehensive review which suggested a dramatic fall in costs for solar PV. It is now of the view that the support rates should be significantly lower than those in the consultation. It is therefore proposing a further consultation on proposals for reduced RO support for solar PV stations which are accredited or add additional capacity after 31 March 2013. It will need to move quickly!
As with onshore wind, the Government also proposes to consult on removing support under the Renewables Obligation for projects at or below 5MW.
Other noteworthy areas
Other areas of interest in the 170 pages of the Response include preserving the level of support for energy from waste with combined heat and power at 1 ROC per MWH (the consultation had suggested a reduction to 0.5 ROCs) reflecting the Government's desire to see increased deployment of the technology; the proposed consultation on removing anaerobic digestion projects of 5MW or less from RO support (a real concern for the AD sector no doubt); and the proposal to consult on further cost control mechanisms under the Renewables Obligation for biomass conversion and co-firing.
Few if any had foreseen the comment in the accompanying Ministerial Statement to the Response - and it was something of a surprise as it did not relate to the renewables section at all (at least not directly). Prefacing the statement with reference to the introduction of a £500 million allowance for large shallow water gas fields, the Government stressed the enduring importance of gas in the UK generation portfolio above and beyond it being a back-up to intermittent technologies.
The suggestion (if that is what it is) that gas is in some way competing with renewables is a strange one which when read in conjunction with the reference to families and businesses being able to benefit from lower bills if gas prices fall, is likely to have the renewables sector, if not losing sleep, then certainly pausing for thought.