Energy Secretary Amber Rudd has signalled further looming cuts to renewable energy subsidies and a firm commitment to nuclear power and shale gas, as well as conventional fossil fuels.
Outlining the department’s priorities to MPs today, Rudd said that security of supply and affordability came first and that Decc remains committed to meeting the UK’s carbon targets. The latter, said Rudd, were “more essential” than renewable energy targets.
Protecting UK industry from unaffordable policy decisions was also a priority, Rudd said, with “value for money at the top” of her list.
When it was pointed out to Rudd by Labour MP Alan Whitehead that locking in nuclear power at 93p per kW for 35 years might not represent best value for money, Rudd countered that “you should not be surprised” that reliable low carbon baseload commanded a premium.
Rudd said she expects a decision on Hinkley Point C to be made this year. She added that the ruling by the European Commission that support for nuclear power did not breach state aid rules was “completely robust”, despite an “unwelcome” legal challenge mounted by Austria. “So we don’t think it will impact on the final investment decision.”
Bonfire of the subsidies
Rudd offered few crumbs of comfort to renewable energy industries, refusing to confirm whether there would be a further round of contract for difference auctions. There will however be another capacity market auction, which has so far largely rewarded existing fossil plant.
While stating that heat will also be a priority for the department, an area in which Rudd admitted it had lagged, she admitted that there was uncertainty about the future of the Renewable Heat Incentive. Meanwhile, an announcement on Feed-In Tariff rates would be made “shortly”, she said.
Rudd was unapologetic for ending onshore wind subsidies a year earlier than anticipated. She claimed that three “larger” wind developers had approached her with plans for subsidy-free schemes in recent weeks.
Speaking alongside Rudd at the Energy & Climate Change Committee, Decc permanent secretary Robert Lovegrove, suggested that costs tended to come down fastest in industries “when subsidies begin to exit the system” because “normal market forces” then prevail. At that point, companies realise “relying on subsidies is not necessarily the most sustainable way of making a profit,” Lovegrove ventured.
Lovegrove added that, on current projections, the Levy Control Framework budget was spent, although he said it would remain within its 20% “headroom” threshold.
Committed to ‘low carbon’ shale gas
Rudd said that the decision by local authorities to reject shale gas planning applications was “disappointing”, but that it was early days yet for the UK shale industry.
“Shale will be an important part of the energy mix for the UK,” said Rudd. “It is an important part of our decarbonisation targets, because it is effectively a low carbon source,” she claimed. “And given that gas is going to remain an important part of our security of supply going forward, how much better to have our own gas than be importing it?
“So I remain committed to ensuring that we can explore for shale. I am aware of concerns. But the experts have all given their … stamp of approval … that it can be extracted securely and safely.”