Earlier end to onshore wind subsidies announced
On 18 June, DECC announced the Government's plans to end public subsidies for new, onshore wind farms by introducing legislation to close the Renewables Obligation across Great Britain for such farms a year early, from 1 April 2016. The end to the subsidies (issued in a form known as 'ROCs') had been scheduled for 2017.
In DECC's announcement, the Energy and Climate Change Secretary, Amber Rudd, said:
“…… we are driving forward our commitment to end new onshore wind subsidies and give local communities the final say over any new windfarms. Onshore wind is an important part of our energy mix and we now have enough subsidised projects in the pipeline to meet our renewable energy commitments”.
DECC's figures indicate that, in 2014, over £800 million of Government subsidies helped onshore wind to generate 5% of the UK’s total electricity.
Fergus Ewing, Scottish Minister for Business, Energy and Tourism, has warned that the Government's decision could be the subject of a judicial review, noting that around 70% of onshore wind projects in the UK planning system are located in Scotland.
DECC's announcement confirms that certain projects will be eligible for grace periods, which the Government is minded to offer to projects that already have planning consent, a grid connection offer and acceptance, as well as evidence of land rights. DECC considers that such eligible projects could capture up to 5.2 gigawatts of onshore wind capacity.
DECC's statement provides that the Government will look at options to continue support for community energy projects, as part of the Feed-in Tariff Review later this year, but this may be of little comfort to developers who have already expended substantial time, money and effort on existing projects.
Regen SW has indicated that, within the South West, there are a number of sites, representing 84.2 megawatts of capacity, which have planning permission granted or are under construction, and that there are further sites, representing 46.2 megawatts of capacity, with planning permission being submitted. It is unclear, however, how many of these projects will meet the grace period requirements.
The grace periods will be critical for developers who have made significant financial commitments, just by putting projects into the planning system, yet alone obtaining all relevant consents. Developers will be keen to ensure that projects which are under development in the existing regime are not penalised.
ROCs are gradually being replaced by a new regime, focussed on Contracts for Difference ('CfDs'), for which a finite pot of public money is available. The early demise of ROCs may have an impact on the timing of the next CfD auction and we await guidance on whether CfD support will still be available for onshore wind projects. Continuing uncertainty will undermine confidence in the CfD auction process and lead to reduced investment in the onshore wind market.
Dale Vince of Ecotricity, interviewed on BBC Radio 4 just after the announcement, commented that most developers had already factored in the change of policy (which was clearly trailed in the Conservative Party manifesto) and that it wouldn't affect their business. Unsurprisingly, Mr Vince then pointed out that the policy seemed to be driven by a desire to preserve goodwill in Tory-voting, rural constituencies, rather than out of any concern to meet renewable energy targets in the most cost-efficient manner.
Developers will be keen to advance in a timely fashion with their current projects, since any delays could make projects ineligible for ROCs support and, therefore, unviable. If the Scottish National Party does press for judicial review, developers will watch with bated breath, since they could benefit from the outcome of any ensuing litigation, but this is unlikely to produce a swift resolution of the issue.
If you think that your projects may be affected by this announcement and would like to consider your options further, Michelmores' Energy and Renewables team is on hand to assist and advise.