DECC has today published its widely anticipated decision on the levels of financial support for generating stations from 2013-17 (2014-17 for offshore wind) under the Renewables Obligation (RO). A table of the tariffs can be found by clicking here.
Whilst the levels of support are generally as expected, there are still areas of uncertainty around onshore wind post 31 March 2014 which may deter developers with lead times past this date and presents an image on the international scale that UK policy is not clear, which is problematic in a market which is competing for global capital. DECC has also proposed to close the RO to projects under 5MW for wind, solar PV and AD, the implications of which may mean that the UK will not see many new small-scale wind, solar PV and AD projects being accredited.
Please note the following key decisions:
- Reduction in support for onshore wind: onshore wind will be reduced to 0.9 ROC/MWh from 1 ROC/MWh from 1 April 2013. This level of support is guaranteed until April 2014, but could be reduced thereafter, dependent upon a significant change in generating costs. DECC has stated that in relation to onshore wind a new consultation will be conducted in 3 months time. It is unclear, however, what new evidence DECC believes is likely to emerge to justify any further reduction in this time period. The uncertainty around this technology post April 2014 is not helpful to the market looking to attract international investment through policy security. Additionally, the approach may impact upon brand new developments: for example, will developers have the appetite to invest in new consents and all the costs and risks incurred in securing development rights when there is uncertainty within a short space of time on what the ROCs will be post-2014?
In response to such ongoing uncertainty, Gordon Edge of RenewableUK has stated:
“While confirmation of onshore wind’s support at the 0.9ROC/MWh level is welcome, investors only have certainty over this figure until April 2014. A further review will be undertaken which, while unlikely to do anything but confirm what we already know, increases uncertainty. Allied with unexpected proposals to force developers of projects under 5MW to opt for the small-scale FIT, the environment for onshore wind has some key issues for investors that the industry will have to spend more time resolving. That said, the good result for offshore wind and the nascent marine technologies means these sectors can move ahead with more confidence, though all technologies need resolution of EMR to see a clear long-term path.”
- Cutback in subsidy of offshore wind: offshore wind will be cut back from 2 ROC/MWh to 1.9 ROC/MWh in 2015/16 and 1.8 ROC/MWh in 2016/17. This remains as proposed in the consultation.
- Increased support for marine and tidal technology: support levels will more than double to 5 ROC/MWh for wave and tidal technologies up to 30MW per generating station. This level of support will be available for generating stations accredited between 1 April 2013 and 31 March 2017. For stations with an installed capacity above 30MW the level of support will be 2 ROC/MWh. This remains as proposed in the consultation.
- Increased support for enhanced co-firing of biomass: a new band for enhanced co-firing of biomass has been introduced with stepped levels: 1) under 50%: 0.3ROC/MWh 2013/14 & 14/15 and 0.5 2015/16, 2) 50-85%: 0.6 ROC/MWh and 3) 85-100%: 0.7 in 2013/14; 0.9 from 2014/15.
- Solar decision delayed: contrary to the consultation, no reduction in support for large-scale solar has been decided upon at this time, but a further consultation is planned this year to discuss the reduction of support level in light of “dramatic falls in costs”. DECC has also announced that projects under 5MW will now only benefit from the Feed-in Tariff, not the RO. The consequences of this is that there are now likely to be no solar PV projects below 5MW; the question is whether this is really what the Government intended?
- AD and onshore wind projects under 5MW no longer eligible for support under the RO: this will lead to deployment based FIT Scheme degression occurring more rapidly and hence may mean that the UK is unlikely to see much onshore wind and AD below 5MW. Again, doubt exists as to whether this is what the Government intended, especially in light of the fact that the Coalition has previously been a big supporter of low cost distributed energy and community ownership.
- Grace period: DECC has decided to introduce a 6 month grace period for delay caused due to grid connection and/or completion of radar installations. In relation to grid delays: 1) confirmation will need to be provided that the delay was not caused due to a breach of the connection agreement by the operator or developer; 2) evidence will need to be provided that the anticipated connection date was on or before 31 March 2013; and 3) the generator will also need to make a declaration that to the best of their knowledge, the generating station would have been commissioned on or before 31 March 2013 but for the delay to the grid connection. In relation to radar the equivalent criteria will be applicable.
- Other: Reductions will also be made for hydro, advanced conversion technologies (pyrolysis and gasification), geothermal, microgeneration and landfill gas.
Edward Davey, Secretary of State for Energy and Climate notes that the changes announced today “will unlock investment decisions, help ensure that rapid growth in renewable energy continues and [show] the key role of renewables for our energy security."
Today’s announcement demonstrates the Government’s commitment to supporting long-term investment in the UK’s renewables industries; however, the uncertainty around onshore wind and the fact that the RO will be closed to projects under 5MW for solar PV, wind and AD will have adverse implications for the market. We would welcome certainty around the support levels for onshore wind after 2014 as soon as possible.
The full response to the consultation can be found by clicking here.