Saturday, August 08, 2015

Feed-in Tariffs - The Future

The intention of this post is to inform rather than advocate. Its about information rather than opinion. It's about future of Feed-in tariffs, the renewable energy subsidy system for smaller developments. And it's stimulated by the large number of complaints I am receiving about planning applications for individual wind turbines, of which there seems to be a glut at present. 

We need to begin by looking back to provide context for the current position. In order to meet it's legal decarbonisation targets, Parliament passed into law the Energy Act in 2008, which amongst much else, introduced the feed-in tariffs scheme. Govt has also adopted other different subsidy regimes to encourage investment for larger developments.

 Currently, the three main subsidy  schemes are the 'Renewable obligation' (ROCs), 'Contracts for Difference (CfD) and Feed-in Tariffs (Fits).  ROCs and Fits are demand led, meaning that the costs are not controllable by Govt. If anyone secures permission and builds a qualifying structure, it automatically gets the subsidy. The inevitable result has been that the overall budget for renewable developments went through the roof! The financial cap, or Levy Control Framework (LCF) as it's known was put in place to control costs up to 2020/21 (paid for through a levy on customers bills). This was blown before May's General Election. When Amber Rudd took over as Secretary of State in May, LCF funding was all gone. There was no money left. The cupboard was bare.

Let's look at the already committed costs under the LCF, up to 2020/21, of the various subsidy schemes. It is already £9.1 billion (at 2011/2012 prices) - over £12 bn in anticipated 2020/21 prices. This is way over budget. The three main scheme contributing to this are ROCs - £6.3bn; CfDs - £3.1bn, Fits - £2.1bn. In order to bring the overall LCF budget under control, the Govt has already announced that the ROCs scheme is being closed in April 2016 for new projects (except for some schemes qualifying for a grace period until April 2017). The Govt has complete control of CfDs already so there is no need to change this. If the money is not there, no schemes will be approved. Which brings us to Feed-in Tariffs. 

As an interim step, the Govt is seeking to discourage too much demand by proposing that the existing pre-accreditation/pre-registration is to end. This system enables developers to know the price they will receive before beginning construction, in effect giving an early price guarantee, inspiring confidence in a period when subsidy levels are falling. In future the price will be that which applies when power is actually first produced. The consultation ends a week on Wednesday. Clearly, the aim is to make Fits less attractive. In addition, the Secretary of State will be reviewing the entire Fits scheme in the autumn. The ending of pre-accreditation is but an interim measure.

 The aspect which most concerns me is the impact on 'community schemes'. It seems the ending of pre-registration applies to these as well. But I hope and will campaign for this to be reversed. And I think it will. No doubt there will be amendments to this post as commenters tell me where I'm wrong.

1 comment:

D Jones said...

Glyn, have you seen the front page of this weeks Cambrian news?
"Major Mach Employer Could Lose A Third Of Workers" A direct negative effect from a poorly thought out conservative government policy brought forward to appease a minority of backbench climate sceptic MP's with personal links to the fossil fuel sector no doubt.

It has been blogged here for your convenience: Your thoughts please?

A quote which hit home was "As a major employer in the Machynlleth area of mid-Wales, the loss of these jobs would have a devastating effect on the local rural economy (around £650k of our salaries in Machynlleth are related to onshore wind). There are few, if any, alternative opportunities for engineering and consultancy professionals in the area and the majority would be forced to relocate should their jobs be lost."

Maybe you accept these major job losses in your constituency as a victory of your personal campaign against onshore wind. Reality is it effects people with high skills in high paid jobs in our area from a reputable and leading business in Montgomeryshire and the wider local economy where these local people spend their income. There are other companies in Mont such as Organic energy in Welshpool which have issued the same warning over job losses and they're in the bio-mass sector and many more across the UK including major employer, Siemens!
All brought about because the keyboard warriors running the social media anti wind campaign sites such as MAP, STOP & CUM are all climate change deniers. I can't call them sceptics as they are venomously vocal when it comes to their choice of language on this subject. Personally, when people such as Richard Bonfield (a close friend of yours I understand, and former treasurer to the Mont Conservatives) resort to childish name calling and typing insulting comments, proves that their arguments are weak and lack substance.

Please do what you can and more to safeguard these renewable energy sector jobs in Montgomeryshire. A short-sighted policy means businesses such as Dulas have no confidence in the UK Government. Alarming when we have a long way to go reach our legally binding 2050 climate targets.

UK energy policy is a joke. Not since John Major was PM have we had a clear long term energy policy. Now, there is not a single sector be it renewable, conventional, nuclear or shale gas that can see a long term commitment from government and that is worrying when it comes to investor confidence.


D Jones