Under the government’s reforms of the electricity market, subsidies for wind farms – which have been added to the bills of energy consumers – will rise by nearly 10% from next year. However, environmental wellness experts have questioned the new regime, detailed last week, as this may mean that renewable energy companies will still find it impossible to invest.
In the UK, wind turbine operators and manufacturers have been holding off on tens of billions of pounds of investment due to fears that subsidies would be cut to unsustainable levels. From 2014, the draft subsidy level or “strike price” will be £155 per megawatt hour for offshore wind farms, and £100 for onshore wind farms – as these are cheaper to build and run. However, in 2018, this will fall to £135 and £95, respectively. Even though the subsidies are being levied from you, the customer, Ed Davey, secretary for energy and climate change, said the new regime would help ease customer energy bills and save households £5bn by 2030. This is because the new move will reduce our reliance on imported fossil fuel energy.
However, the new “contracts for difference” will run for only 15 years, whereas the old system was set to run for 20 years. This means that investors will have less certainty and appetite for pouring their billions into our green economy. According to Maria McCaffery, chief executive of RenewableUK, which represents wind companies, ‘The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under contract for difference system compared to the Renewable Obligation. However, more details need to be set out. The most important ingredient remains investor confidence and that will take time to land. The secret is consistent long term support and investors seeing that government is behind renewables and low carbon generation for the long term.’
Ronan O’Regan, director at PwC, commented, ‘The strike price headlined on offshore wind sounds reasonable but it depends on how it reduces over time and it is difficult to compare directly with what projects get with the Renewable Obligation. Existing investors in offshore wind will broadly welcome the draft prices. But questions remain whether this on its own will be enough to attract the new financial investors that the sector requires…Capital is internationally mobile but constrained, because investors will assess opportunities across multiple markets and sectors. The UK needs to convince investors that its market is both attractive and offers a stable regulatory environment.’
Comments are closed.