RECAI: Country focus

United Kingdom

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Never rains but pours. Once again, a number of major announcements for the UK’s renewable energy sector have brought joy and tears. In late December the EMR received royal assent, bringing the contracts for difference (CfD) regime into law and confirming the final strike prices announced in December. Year-end also saw an update to the Final Investment Decision (FID) Enabling process, identifying those projects ranked as provisionally affordable ahead of contract award in early 2014. Finally, some signs of certainty.

Head to head. But the smiles disappeared as quickly as they arrived after January’s launch of a consultation on Government plans to make more mature renewable technologies compete directly for CfD subsidies from day one of the new support regime. This will see onshore wind and solar PV compete for the first time as early as 2014. Energy from waste, hydropower, landfill gas and sewage gas will also be included in these “constrained auctions”, while less mature technologies, like offshore wind, wave and tidal, anaerobic digestion, and dedicated biomass plants, will not have to bid competitively for capacity.

Competitive tension. The Government hopes these auctions will return bids below the guaranteed strike prices, with the Department for Energy and Climate Change (DECC) claiming project pipelines show demand is high enough to create competition. Critics say the proposal risks destabilizing investment, especially for onshore wind, given already planned regime changes and subsidy cuts. DECC’s proposals appear partly motivated by the EU’s latest state aid guidelines, which require a move away from technology-specific forms of subsidy.

Mixing it up. These proposals have done little to dispel accusations that the Government continues to send mixed signals. In January, the Prime Minister said, “We’re going all out for shale.” as he announced plans to allow local authorities to keep 100% of business rates raised from fracking sites.

Lobbying for the EC to reject calls for a binding 2030 renewable energy target, and yet another close defeat for a proposal to set a 2030 UK decarbonization target in 2014 rather than 2016, has also knocked investor confidence in the Government‘s commitment to a low-carbon future.

Offshore hit. The UK offshore sector has also taken a battering, with a number of high-profile projects mothballed recently (see full article for details [link to pdf]). These announcements highlight future technical, economic and policy challenges. However, with more than 40GW of offshore capacity allocated in site licensing rounds to date — well above the Government’s 10GW 2020 target and exceeding the money set aside to fund offshore projects in this period — further cancellations and mothballing might be expected

Not written off. But there is still a lot to shout about for offshore. It has been relatively unscathed, and indeed boosted, by the finalization of CfD strike prices. The awarding of a site lease to Statoil in November to install the UK’s first floating offshore wind farm should boost efforts to open up deepwater sites. In December, final approval was granted to Able UK’s £450m (US$736m) project to construct offshore wind manufacturing and port facilities in northeast England, and in January, the UK’s GIB joined forces with Japan’s Marubeni on its proposed acquisition of a 50% stake in DONG’s 210MW Westermost Rough offshore wind project.

Also in this article:

  • Final strike
  • Supply security
  • Investors want signs
  • Doing more

Read full article (pdf, 1.9MB)

Local office contacts:

   Ben Warren

   Klair White