UK Onshore Windfarm Subsidies Take A Cut

The UK government is ending public subsidies for new windfarms and giving local residents the final say on new developments in their areas.
Published: Wed 24 Jun 2015

During the past two decades, and particularly the last, wind power in the United Kingdom has mushroomed as the government has moved towards the EU’s 20% by 2020 renewable energy target. Much of this development, however, has been controversial with the public who have seen power bills rising to cover so-called ‘green subsidies’, wealthy landowners collecting rentals for siting wind farms and for those nearby, landscapes blighted.

Onshore wind subsidies to end

But this seems to be about to change: on 18 April the government announced its intention to end subsidies for new onshore wind under the Renewable Obligation from 1 April 2016 – a year earlier than planned – alongside a plan to put decisions on any new developments in the hands of local communities.

The UK has around 8.2GW of onshore wind currently, according to the industry trade association, RenewableUK. In 2014 onshore wind received subsidies of over £800 million and generated 5% of the UK’s total electricity.

In a statement to parliament Energy and Climate Change Secretary, Amber Rudd said analysis indicates that, after taking into account an early closure, onshore wind deployment under the Renewables Obligation will be in the region of 11.6GW. In addition to the 0.75GW of onshore wind that has secured a Contracts for Difference, this puts the UK above the middle of the range set out in the delivery plan to meet the 2020 targets. “It is therefore appropriate to curtail further deployment of onshore wind, balancing the interests of onshore wind developers with those of the wider public,” she said.

Under the proposals, up to 5.2GW of onshore wind capacity in projects that already have planning consent, a grid connection offer and acceptance, as well as evidence of land rights, could be eligible for grace periods.

Further, decisions on the Contract for Difference and feed-in tariff onshore wind subsidy schemes are to follow. In the case of the former, Rudd said she would set out plans when announcing those in relation to further allocations. In the case of the latter, options for continued support for community onshore wind projects will be considered as part of a review under way this year.

Wind industry objects to cuts

The industry has been quick to voice its objections. In a statement RenewableUK has urged the government to think carefully before it implements any cuts in financial support to onshore wind, stating the announcement leaves thousands of British jobs and millions of pounds worth of investment hanging in the balance.

“The government’s decision to end prematurely financial support for onshore wind sends a chilling signal not just to the renewable energy industry, but to all investors right across the UK’s infrastructure sectors,” warned RenewableUK’s chief executive, Maria McCaffery. “If government was really serious about ending subsidy it should be working with industry to help us bring costs down, not slamming the door on the lowest cost option.”

Similar sentiments have been expressed by real estate and capital advisory service company Savills Energy, which expresses “deep concern” that the move will cost the industry millions.

“The government’s decision to terminate onshore wind subsidies is baffling to both industry and consumers,” said Tim Waterfield of Savills Energy in a statement. “We urge the government to reconsider its decision and to avoid causing an irreversible impact on investor confidence.”

Strong objections have also been put forward by Scotland’s minister for business, energy and tourism Fergus Ewing. With approximately 70% of the windfarms in planning in Scotland, Ewing has warned that the decision could be the subject of a judicial review, according to a BBC report.

Are subsidies running out?

Minister Rudd has not announced how or if this current Renewable Obligation subsidy will be reallocated, whether towards offshore wind or fracking, or serving to achieve government savings.

Alternatively there may be a deeper reason for the cut. According to the thinktank Policy Exchange, subsidy funding is fast running out as DECC has significantly underestimated the cost of its policies. Among these is the small scale feed-in tariff scheme, which has grown due to an unprecedented deployment of solar PV, and the offshore wind subsidy, which is higher than budgeted due to the higher capacity factors of the latest technologies being deployed.

“The implication of [Policy Exchange’s analysis] is that DECC may have already committed the entire [levy] budget out to 2020…” writes head of Environment & Energy, Richard Howard in a blog.

Communities get say on windfarms

In the second part of the 18 April announcement, in what is likely to be a welcome move, Communities Secretary Greg Clark announced that in the future local residents would have the final say over whether a wind development – even if only one turbine – gets the go-ahead in their area.

Under planning rule changes local councils will only be able to grant permission for a development if the site is in an area identified as suitable for wind energy as part of a Local or Neighbourhood Plan, and following consultation, the planning impacts identified by affected local communities have been fully addressed and therefore has their backing.

Notably however, such permissions have not been granted to other options such as fracking, which has proved even more controversial than wind with potentially affected local communities.

Further reading

BBC: Earlier end to subsidies for new UK onshore wind farms

Policy Exchange: Dear Energy Secretary, I'm afraid to tell you there is no money….