The government has confirmed further cuts to renewable energy subsidies. Support rates for biomass and solar power will be reduced following consultation.
The department of energy and climate change (Decc) will remove the grandfathering element (guaranteed levels of subsidies for a set duration) for biomass conversion and co-firing. It believes the move could save the annual budget for renewable subsidies some £500m in 2020/21. Some exceptions will allow grandfathering arrangements to continue, to protect firms that had already made major investments.
Meanwhile Decc is planning to cut subsidies for sub-5MW solar under both the renewables obligation and the feed-in tariff scheme. It plans to close the RO early and remove grandfathering and will also look to reduce subsidy rates for smaller solar schemes, including domestic installations in a wider consultation.
The department has also confirmed that a further round under the contracts for difference support auctions will not now be held in October.
Unsubtle shift in emphasis
The drive to reduce renewable energy subsidies has been well trailed by the Conservative government. Energy Secretary Amber Rudd yesterday signalled that the so called trilemma (the need to balance security of supply with decarbonisation of the power system and affordability) had shifted in emphasis. The merit order now appears to be security of supply, affordability and then decarbonisation.
Reducing or removing subsidies for renewable power will require the department to deliver much more stringent energy efficiency policies in order to achieve legally binding carbon targets. Currently elements for businesses such as Esos do not mandate action on energy audits to be taken. Meanwhile, hundreds of thousands of UK businesses are not obliged to undertake any energy efficiency measures.
While Decc-commissioned analysis of the Carbon Reduction Commitment scheme this week suggested that rising energy prices had been the main driver of business energy efficiency measures, energy secretary Amber Rudd must now establish a robust and credible framework around energy efficiency if she is genuinely committed to decarbonising the economy at the lowest cost.
See the consultation on subsidy reductions here.
Download a free report on financing energy efficiency here.
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