On 20 October, the Department of Energy and Climate Change set out proposed support levels for large-scale renewable electricity from 2013-17 (2014-17 for offshore wind) under the renewables obligation (RO). The proposals were delayed, and this, along with the postponed launch of the renewable heat incentive (RHI), has caused uncertainty, with investors unwilling to commit to project plans without guaranteed support levels.
Ernst & Young Director, Arnaud Bouille says, “The gradual step down in support can be debated; but it does confirm the UK Government’s mid-term commitment to renewables and sends a signal to the sector: the industry needs to become more competitive and costs need to come down.” The Government says the revised incentives will cut the cost of the subsidy program by up to £1.3b (€1.5b), and help the UK meet its 2020 EU target.
Onshore wind projects will receive 0.9 ROCs/MWh from April 2014 onward, down from 1 ROC. The reduction will probably mainly affect smaller projects and community schemes as opposed to large-scale infrastructure projects.
Progress on the planning regime and grid access is still needed to unlock the country’s onshore wind potential. A recent report showsplanning approval rates for new wind farms down to an all-time low of just 42%. Developers are being asked to strengthen local community engagement and make sure projects are economically viable before applying.
Offshore has emerged as the winner in the banding proposals, which extend state subsidy levels by a year to 2015 and reduce previously set subsequent cuts. For the 2014-15 tax year, offshore wind generators will continue to get 2 ROCs/MWh, reducing to 1.9 the following year, and 1.8 thereafter. The current 2-ROC allocation was expected to expire in April 2014, decreasing to 1.5 ROCs after that.
The regime should provide the stimulus needed to support investment for large infrastructure projects, and Ernst & Young estimate an investment opportunity worth around £30b (€34b) for large infrastructure funds and other institutional investors looking for long-term returns.
Overall, bands for different forms of biomass burning were unchanged, although a new category under consideration – enhanced biomass co-firing – would double support to 1 ROC.
However, failure to improve support for dedicated biomass, which will be held at 1.5 ROCs until 31 March 2016 before decreasing to 1.4, has disappointed many.
Several projects are on hold because the current subsidies make it uneconomic to continue, including Drax, which recently had two 299MW projects approved but said they would only be built if subsidies increased.
Under the banding review, solar power continues to get 2 ROCs/MWh until 2015, when it will be cut to 1.9 a year, and 1.8 thereafter. However, DECC recent ly launched a consultation on UK solar FIT tariffs, proposing a reduction of up to 55.5%, depending on installation size, with reductions to the tariffs for solar PV installations 4-250kW in size also proposed.
Wave and tidal power
The Government has recognized wave and tidal as emerging technologies and awarded 5 ROCs/MWh compared with the current 2, for the first 30MW of capacity of any tidal stream or wave power project. Additional capacity will receive 2 ROCs. The Government estimates the UK could install up to 300MW of wave and tidal power capacity.