Getting wind farm subsidy and planning right

The role of onshore wind in meeting renewable targets and Britain’s future energy needs has always been contentious. The IPPR has thrown something of a grenade into the debate with a paper that claims there is a loophole in the subsidy scheme that is costing the taxpayer dear.

Given the scale of customer financial support for wind generation it is important that subsidy schemes are cost-effective. However, a loophole in the feed-in tariff (or FiT) for onshore wind energy threatens to cost the taxpayer more than £400 million over the scheme’s lifetime, and to erode both public confidence in onshore wind.

The loophole identified by IPPR sees developers installing ‘derated’ turbines – turbines which are ‘capped’ so that they generate less energy. Turbines are derated in this way so that developers and investors are able to qualify for the more generous subsidy offered to lower-capacity turbines, generating 100–500kW. By installing derated turbines, developers are making larger profits off a feature of the scheme that was designed to support small-scale projects. Derated turbines are also physically larger than correctly rated turbines of the same capacity, and therefore threaten to exacerbate public concerns about the visual impact of onshore wind without providing any pay-off in terms of increased electricity generation.

IPPR believe that, at September 2014, almost half of installed turbines qualifying in the higher-subsidy 100–500kW band were derated. Even allowing for future reductions in the amount of this subsidy, they have calculated that each derated turbine will earn £100,000 in ‘excess subsidy’ each year, or £2 million over its 20-year lifespan. This means that, by September 2014, the British energy billpayer was already committed to £175 million in excess subsidy payments on derated turbines. Assuming the number of onshore wind turbines continues to grow at its historical rate, this total liability will swell to more than £400 million by the end of 2015, if this loophole is not closed.

IPPR makes three suggestions for change. Subsidy based on rotor size rather than capacity; a subsidy cap; and a new subsidy band to take away the incentive to exploit the loophole.

These revelations will strengthen the anti-wind farm lobby. An open letter, which calls into question the government’s judgement on large windfarm projects, has been signed by a group of rural protection groups including the National Trust for Scotland. It says the government, in backing large windfarm developments, has ignored its own advisors and failed to ensure windfarm plans have been laid open to “proper and democratic scrutiny”.

It also says: “It is vital that any decisions on the location of these developments rely on the fair and impartial assessment of all pertinent information and points of view. Unfortunately, we do not believe that the Scottish Government is doing this in a consistent manner with windfarm developments.”

As wind farms play such a major role in meeting our renewable targets, it is important that we get the subsidy and planning regimes right.

 

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