Fewer onshore wind farms to be built as government cuts subsidies

December 4, 2013 by  
Filed under Green Energy News

Gordon MacDougall, chief operating officer of renewable developer RES, said: “This
announcement is a blow for investor confidence and will cut the deployment
of onshore wind – the lowest cost renewable energy technology in the UK’s
energy mix.

“By undermining onshore wind before it reaches maturity and substituting it
with more expensive low carbon energy, the cost to the consumer will
increase.”

However, dozens of new, larger onshore wind farms are still likely be built,
disappointing those who hoped for an end to the controversial technology.

Ed Davey, the energy secretary, denied there would be any reduction in the
total number of planned new onshore wind farms.

The subsidies had been cut because the costs of building onshore wind turbines
were now “lower than we had expected”, he said.

“It just means we can deploy it more cheaply and get better value for
money for consumers,” he told the Telegraph.

Ministers also confirmed plans to subsidise a massive increase in construction
of offshore wind farms. These are significantly more expensive than onshore
turbines to build and operate, requiring subsidies at about three times the
market price of power.

The industry had claimed that proposed subsidies set out in June would see
subsidy levels cut too steeply over the rest of the decade.

After months of lobbying ministers have agreed to increase by £5 the level of
subsidy offered to plants that start running in 2018-19.

Mr Davey said there could be more than 10 gigawatts of offshore wind farms
running by 2020 – trebling current capacity.

He defended the high subsidies, saying they were necessary because the
technology was new.

“Look at any technology – personal computers, mobile phones when first
came out were less efficient and more expensive. Now mobile phones after
investment are cheaper and more efficient, and we expect to see those
productivity and cost gains as we deploy offshore wind.”

He said Britain was on track to meet its EU target of generating 30 per cent
of its power from renewable sources by 2020.

RenewableUK said the offshore subsidy increase sent “an important
political signal that the Government recognises the need to back this sector”.

But Guy Newey, head of environment and energy at think tank Policy Exchange,
said: “Today’s announcement highlights the pitfalls of trying to meet a
pointless and expensive renewable energy target. We are having to plough
more and more subsidy into immature technologies like offshore wind. This
pushes up bills and means we aren’t meeting our carbon commitment in the
cheapest way possible.”

In June, ministers announced that onshore wind farms built until March 2017
would receive a subsidised price of £100 for every ‘megawatt-hour’ unit of
power they produce – about double the market price – falling to £95 for
projects from April 2017.

The new levels announced on Wednesday are £95 until March 2017, falling to £90
thereafter.

“If this cut has been made for political reasons rather than economic
ones that would be a worry,” RenewableUK said. “All politicians
need to understand that uncertainty spooks investors and it is the consumer
who bears that cost.”

Chief Secretary to the Treasury Danny Alexander denied suggestions the move
was in response to Tory MPs unhappy at wind farms being sited in their
constituencies.

The change is necessary because there has been so much investment in onshore
wind and solar energy that they no longer needed so much state support,
sources from both coalition parties said.

Mr Alexander has described the shift in the subsidies as “a rebalancing”
and said overall spending would not change.

In contrast, they said, offshore wind sources still needed more subsidy to
encourage long-term investment.

One Conservative source told the BBC he expected “quite a dramatic cut”
in prices for onshore wind in 2015 and beyond. Another spoke of the “beginning
of the end for mature renewables”.

It is also thought that the policy will help to counter the threat from UKIP
which opposes all wind farms on principle.

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