Wind farm subsidy – right policy, wrong timing

The UK government decision to exclude new onshore wind farms from a subsidy scheme a year earlier than planned, is the right energy policy, but wrong on timing.

The subsidies, which are paid for by consumers, will end from 1 April 2016 although there will be a grace period for projects which already have planning permission. In a statement to the House of Commons, Energy Secretary Amber Rudd said that taking into account the early closure of the Renewable Obligation for onshore wind, the UK will have 11.6GW of onshore wind supported by the mechanism, alongside 0.75GW supported by contracts for difference. This is within their medium range of expectations.

Scottish Renewables said the move was “neither fair nor reasonable” and they claim Scotland could lose £3bn in investment. Chief executive Niall Stuart said it was “bad for jobs, bad for investment and can only hinder Scotland and the UK's efforts to meet binding climate change targets”.

Scottish Conservative energy spokesman Murdo Fraser said: “The latest figures show that with all the wind projects already constructed, those under construction or given consent we have already met the SNPs 100% target for renewable electricity. What Scotland now urgently needs is a balanced energy policy with wind as part of the mix, but only one component rather than being the primary focus.”

It's hard to disagree with that analysis of the need for a balanced energy policy. Onshore wind is too large an element of the current mix in Scotland. However, it ignores the impact of stop start energy policy on investment. Once a plan has been set, in this case subsidy for new projects until 2017, government should leave the industry with that certainty.

For that reason I agree with Scottish energy minister Fergus Ewing's view that Decc’s decision will “cause huge uncertainty for investors not only onshore but across the renewables sector as a whole”. That doesn't change my view on the Scottish Government's unbalanced energy policy, but he is right on timing.

There will be much political sound and fury, followed by the possibility of legal challenge. Companies who have invested in plans on the basis of the 2017 end of the Renewables Obligation may well be able to argue that they had a reasonable expectation that the subsidy regime would be in place. There may be some wriggle room by defining the grace period flexibly.

So, while the UK government is right in terms of energy mix, they are wrong to bring the date forward. Energy policy has to be for the long term, this is another example of the short-termism that has bedevilled the industry.

 

 

PS. Brian Wilson's column in the Scotsman on the same subject is definitely worth a read.

 

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