DECC have published their consultation document on the banding review for Renewables Obligation Certificates (ROCs).
The consultation appears soon after the Conservative Party Conference, where there was a strong suggestion of, at best, a division in the coalition camp - between Chris Huhne, on the one side, and George Osborne and David Cameron, on the other side - as regards ongoing support for renewables investment.
The perception that the honeymoon period for renewables may soon be over is perhaps given more context in the Levy Control Framework, as announced in this year’s budget, which sets an overall cap on the amount that can be spent over the current Comprehensive Spending Review (CSR) period - 2011-2015. The government’s emphasis is on supporting renewable electricity generation cost effectively, and current modelling suggests that, without a reduction in banding levels, the levy envelope for the RO would be exceeded by around £130m and £290m in 2013/14 and 2014/15 respectively.
So, for example, in relation to offshore wind (our only hope of meeting our 2020 targets) the DECC take the view that the cost of deploying offshore transmission is 2ROCs/MWh, and therefore propose that that is the marginal cost of meeting the target. Therefore, subsidies should “encourage” an ever-decreasing cost. So, for accreditation in 2015/16 the proposed banding for offshore is 1.9 ROC/MWh, and for 2016/17 it is 1.8 ROC/MWh. Further, as offshore wind is taken as the marginal technology, all other technologies (except for wave and tidal) should be subject to a maximum of 1.8 ROC/MWh by 2016/17.
Wave and tidal is regarded as in need of a much higher banding support in order to encourage investment in a sector that is still far from commercial development, and so the proposal is that for installations of up to 30MW that are accredited and operational before 1 April 2017, the banding should be 5 ROCs/MWh.
Apart from wave and tidal, there is a general reduction in support for renewables in the consultation document, perhaps a sign that even this sector is not immune from the tightening of purse strings across the board. However, lest we get too disheartened, we must recall that when support for solar PV projects was slashed earlier this year, which many took to sound the death-knell for solar in the UK, it was followed very quickly by a sharp fall in the cost of PV cells. So, we may find that the steadily-reducing level of government support for renewables (excepting wave and tidal) has the intended result of encouraging a reduction in installation costs and we remain on track to meet our 2020 targets.