UK’s Renewable Energy Plan Blows in the Wind

The “abrupt” introduction of subsidy cuts by the UK government has resulted in investor uncertainty causing the UK to miss its EU renewables target.
Published: Fri 20 Nov 2015

A leaked letter, written by Energy Secretary Amber Rudd, has revealed that the UK will miss its legally binding 2020 renewables goal of 15% by a quarter.

UK subsidy cuts badly timed

This news, which has caused a major uproar amongst environmentalists, the British public, and of course the renewable industry, has arrived at a most inappropriate time – just before the Climate Conference in Paris. The letter indicates that there is an absence of a credible plan and inappropriate policies to meet the target which could mean on-going fines imposed by the EU Court of Justice until the UK reaches the target level.

The news comes as a big shock since the Government has been informing the public that it is “absolutely committed to getting a global deal in Paris, which will create a level playing field for businesses, driving innovation and growing the low carbon economy.”

A top UN environment scientist, Jacqueline McGlade, chief scientist of the UN’s environment programme and a former head of the European Environment Agency, has criticised the UK’s cuts in renewable energy subsidies (wind, solar and biomass). She said the many UK policy reversals cutting support for wind and solar power contradicted the unprecedented pledges that nearly 150 other countries had been making for the Paris climate deal, which is due to be agreed next month.  She adds that the withdrawal of subsidies and tax breaks for fossil fuels is the “wrong message” to send ahead of the Paris climate meeting . The removal of tax exemption from low-carbon power generators and cuts to the government’s primary domestic energy efficiency programme will not go down well.

Adding insult to injury is the fact that the World Energy Council has downgraded the UK’s top-notch AAA rating. The Government’s recent decision to end subsidies for onshore wind power and to slash backing for solar farms raises the prospect of a further cut to its rating. This could push the UK down the league table for electricity supplies from its current fourth place – behind Switzerland, Sweden and Norway – warns Joan MacNaughton, executive chair of the World Energy Council.

The blaming game

Ms Rudd blames the shortfall on the transport and heating sectors, which are included in the energy target but many believe that the renewable subsidy cuts are to blame causing major uncertainty amongst investors. Scottish energy minister Fergus Ewing has come out strongly against UK ministers for fostering uncertainty in the industry. The Scottish government is blaming Westminster after a report suggested it will be impossible to meet its target of 100% renewable energy usage by 2020 without further investment.

Industry body, Scottish Renewables has predicted that only the equivalent of 87% will be reached by 2020. Its study found that 33,122GWh of energy will be generated from renewable sources by 2020 but that demand was likely to be for 38,256GWh. He said that announcements made by the UK Government represent an attack on the renewables sector, creating huge uncertainty for investors, developers and communities, and undermining Scotland’s ability to fulfil its renewable energy potential.

Last year’s figures show that almost half of Scotland’s electricity comes from renewable sources so it comes as no surprise that Mr Ewing shares Scottish Renewables’ concerns that the “damaging and premature cuts” to support for renewable energy being driven through by the UK Government will hamper future progress.

Knock on effect

While investor uncertainty is a major concern, another is that the subsidy cuts will result in the UK industry not having access to reduced wholesale electricity prices.

Professor Keith Barnham from the Department of Physics at Imperial College, agrees that a focus on renewable power generation should be a priority during the upcoming COP21 climate summit in Paris. Professor Barnham carried out a study which looked at how a range of countries are progressing towards an appropriate mix of renewable technologies. What is ‘appropriate’ depends on the demand and the potential supply of energy types available in a country that would lead to a stable and reliable grid. Thanks to renewables, the wholesale electricity price started falling in the UK in 2014 as it did in Germany in 2011. He explains, “Our data shows we were catching up with the Germans but the renewable subsidy cuts will mean we will fall even further behind.”

Due to Germany’s excess of cheap solar and wind powered electricity, the wholesale electricity price has fallen 37% in the last four years. Much of German industry does not pay the levy that supports renewable energy so that they also benefit directly from this price fall.

The UK’s subsidy cuts are expected to slow the “impressive” growth in the renewable sector and many jobs will be lost, according to Professor Barnham.

The study suggests that while offshore wind power is rising exponentially in the UK, Government cuts to renewable energies, particularly solar and onshore wind power, will mean the country will fall even further behind Germany, the country closest to its targets for all-renewable energy production.

Professor Barnham suggests that the UK Government re-introduces the renewable energy subsidies through tax relief as it does with the much larger fossil fuel subsidies, rather than as a levy that adds to the wholesale price. In this way, domestic and industrial electricity users will benefit from the further wholesale price falls which can be expected when the renewables resume their exponential rise.

“If they continue to expand as they were doing, there would be no need to build new nuclear power plants. Nuclear is supported by a levy which will get much bigger as the wholesale price continues to fall,” he explains.

Phasing out too abrupt?

UK renewable subsidies are often paid via household energy bills, as is the case in many other countries, and the government has imposed a cap on the total amount that could be spent of £7.6 billion a year by 2020.

But DECC officials say that wind and solar farms had been built at such a rate that spending would rise to £9.1 billion, adding an extra £18 to bills by 2020, so support had to be scaled back.

Ms Rudd says she wants subsidies phased out completely in the future. In fact her department’s most senior civil servant, Stephen Lovegrove, says the support is likely to end within 10 years.

Other countries have reduced their support for wind and solar power, but the UK reversals which include an end to a home energy efficiency scheme, have been notable for the abrupt way in which they were introduced and the absence of certainty about future policy moves. [Cutting the Renewables Subsidy Umbilical Cord].

It is clear that the UK energy sector needs investment and that this will inevitably come from consumers. But £18 per year for renewables development is chicken feed when compared to the commitments to nuclear power. There needs to be an examination of costs and impacts to enable a good value, low carbon energy system to evolve.   Nuclear power at £90+ per MWh is expensive and DECC has to be more transparent about this.

A recent report by Greenpeace states that the UK could generate more than 80% of its electricity from renewable energy within the next 15 years but will this be possible without the Government’s support?

Further reading

Imperial College London- Solar subsidy cuts will deny UK industry reduced wholesale electricity prices