As we predicted in our recent update, Energy Secretary Amber Rudd has today (18 June) announced that the Renewables Obligation (RO) subsidy will close to new onshore wind projects a year early, on 1 April 2016.
In a written speech to Parliament this morning Amber Rudd said that the changes will be brought through a new Energy Bill to be introduced this Parliamentary session. There will be a grace period, which seemingly will be along the same lines as that afforded to solar PV projects (for which the RO closed in April 2015), so that projects "which, as of today, already have planning consent, a grid connection offer and acceptance, and evidence of land rights for the site on which their project will be built" will still be able to apply for the RO (provided of course they commission by the original 31 March 2017 deadline). This is not set in stone and there will be a consultation period before the legislation is implemented which will cause further delay and uncertainty. The impact of this will no doubt unfold over the coming days as we see whether projects will have to be put on hold until sponsors are able to guarantee to their funders that they will be eligible to receive the subsidy.
The suggestion is that the grace period on offer could benefit up to 5.2GW of projects but that there could be as many as 3,000 turbines still in the planning process which therefore might be at risk.
The proposals will apply across Great Britain. After the announcement was made, Fergus Ewing, Scottish minister for business, energy and tourism and member of the Scottish parliament, said he had warned the UK government that the decision could be the subject of a judicial review.
"The decision by the UK government to end the Renewables Obligation next year is deeply regrettable and will have a disproportionate impact on Scotland, as around 70% of onshore wind projects in the UK planning system are here", he added.
Ms Rudd also announced that Greg Barker, Secretary of State for the Department for Communities and Local Government will today publish new planning guidance which will implement the other part of the Conservatives' manifesto pledge, that local communities will be given the final say over onshore wind farms. The new guidance will impose two new “planning tests” so that councils can only approve wind farms on sites that have been clearly designated as part of any local or neighbourhood plan, and where the proposed project has the backing of the local community.
Contracts for Difference and Feed-in Tariffs
The RO is one of three subsidies available for onshore wind. Feed-in tariffs are available for smaller schemes and these are currently being reviewed, although it looks like support for community projects under the FIT will continue.
Amber Rudd said, "With regard to CfDs, we have the tools available to implement our manifesto commitments on onshore wind and I will set out how I will do so when announcing plans in relation to further CfD allocations."
That could cover a spectrum of possibilities - from simply a continuation of the round 1 allocation round position, where the budget for established technologies (including onshore wind) was of course significantly lower than that made available for less established technologies; to some sort of cap on the support available for onshore wind projects; to, in extremis, no budget being made available for onshore wind at all.
The provisional allocation of budget for the next round of CfDs is due in July. Previously the Government indicated there would be £50 million available for established technologies (including onshore wind). We will have to see if this will still be the case. If not, then wind projects that are in the pipeline but not yet sufficiently advanced to take advantage of any RO grace period may find themselves without any subsidy at all.
The European Commission's latest renewable energy progress report, published two days ago, named the UK as one of three countries falling behind with its target to generate 15% of its energy from renewables by 2020. So Amber Rudd's assurance that "we now have enough subsidised projects in the pipeline for onshore wind to play a significant part in meeting our renewable energy commitments" seems to be missing the point. With only 5.1% of energy being generated from renewables in 2013, it seems hard to see how ending the subsidy for one of the cheapest sources of renewable power, and making it tougher for turbines to get planning permission, will help the UK's progress towards meeting that target.
We will continue to keep you updated when we find out more.