The UK government is proposing new changes to its renewable energy subsidy mechanisms to reduce the burden of clean energy growth on the public purse.
The Department of Energy and Climate Change (DECC) has launched consultations on proposals to end the renewables obligation (RO) for solar schemes and alterations to the feed-in tariff (FiT) regime for smaller-scale solar projects.
It will also cut back support for certain biomass generators, it said in a statement, and undertake a review of the FiT regime to drive further savings.
DECC said that the measures would provide better control over spending and ensure that bill-payers get "the best possible deal". The proposals have met with widespread criticism from the renewables sector, however, and come just weeks after the government said it would bring an early end to RO support for the onshore wind sector.
The Renewable Energy Association (REA) said that while not completely unexpected, the proposals would affect investor confidence. It referred in particular to a proposal to end grandfathering - the mechanism by which projects receive a set subsidy rate for their lifetime.
This would particularly be an issue in the solar sector, which has achieved cost reductions of 70 per cent in the last five years, said REA. "The industry is at a critical point as it seeks to reach grid-parity as quickly as possible yet retain the size and scale necessary to become a key contributor to the UK economy," said REA chief executive Nina Skorupska.
DECC said that factors such as low wholesale electricity prices and high demand for FiT and RO support would lead to an overspend of the Levy Control Framework (LCF), the budget that provides renewable energy subsidies. Energy Minister Amber Rudd said that the government would soon announce post-2020 limits for the LCF.
“My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way," said Rudd.
“Our support has driven down the cost of renewable energy significantly," added Rudd. "As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We're taking action to protect consumers, whilst protecting existing investment."
The Solar Trade Association (STA) said it was "disappointed" by the announcement. "This is damaging for big solar rooftops as well as solar farms," said STA's Leonie Greene. "The possible removal going forwards of the guarantee on a set level of support throughout a project's lifetime once built is a real blow to investor confidence.
“There is a danger if government pulls the rug on solar farms too early, the market will have nowhere to go. This could be further compounded by changes to the Contracts for Difference auctions. What we need is a bridging strategy and we are very keen to work with DECC to achieve that."
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