(Bloomberg) — The U.K. proposed to end an assistance
program for small-scale renewable energy projects as part of a
drive to cut the costs to consumers of subsidizing clean
technologies.
Ministers plan to cut subsidies by as much as 87 percent
from January and cap the budget for assistance, ending the
program for new entrants after March 2019, according to the
proposals outlined Thursday on the Department of Energy and
Climate Change website. If it isn’t possible to rein in
spending, the program of guaranteed electricity prices, known as
feed-in tariffs, may close in January, it said.
The tariff program “has exceeded all renewable energy
deployment expectations,” the government said. “However, this
deployment success has also come with costs exceeding our
projections.”
The announcement is a blow to the solar industry, which
accounts for more than four-fifths of all installations under
the program, according to Bloomberg calculations. Energy
Secretary Amber Rudd has ended or reduced a slew of clean energy
programs since her Conservative Party won the general election
in May, saying her actions are designed to protect consumers who
pay for the subsidies on gas and power bills.
‘Hugely Damaging’
Thursday’s proposals “would be hugely damaging for the
U.K. solar industry,” said Mike Landy, head of policy at the
Solar Trade Association. “Proposals to suddenly cut tariffs
combined with the threat of closure of the scheme next January
will spark a massive market rush. This is the antithesis of a
sensible policy for achieving better public value for money.”
The program has led to the installation of at least 3.3
gigawatts of small-scale renewable power capacity since it
started in 2010, 83 percent of it solar, the calculations show.
Last year, it cost consumers 850 million pounds ($1.3 billion)
in subsidies, up from 650 million pounds a year earlier.
The Treasury sets annual spending caps on clean-energy
assistance programs that rise from 4.3 billion pounds this tax
year to 7.6 billion pounds in 2020-2021. The government projects
actual spending to reach 9.1 billion pounds by 2021, an overrun
that only just falls inside the 20 percent headroom provided to
allow for shifting costs.
Thursday’s proposals would limit spending on new projects
through March 2019 to 75 million pounds to 100 million pounds.
That would allow for 82,000 new solar panel installations,
mostly rooftop, between now and the closure, according to the
energy department. It may also allow for 7,400 new small wind
projects, 920 hydropower plants and 70 anaerobic digestion
installations.
Smallest Projects
The plan would cut subsidies in January for the smallest
solar projects to 1.63 pence per kilowatt-hour from 12.47 pence.
Wind and hydropower rates would also be cut, with no reduction
for the rate paid to anaerobic digestion plants. The government
proposed a new formula for quarterly “degression” to reduce
assistance as costs come down and deployment rises.
“The proposed cuts mean that installing solar panels at
home will no longer be attractive to British families,” Good
Energy Group Plc Chief Executive Officer Juliet Davenport said
in an e-mailed statement.
The proposals are subject to a public consultation that
ends on Oct. 23.
“If cost-control measures are not implemented or effective
in ensuring that expenditure under the scheme is affordable and
sustainable, government proposes that the only alternative would
be to end generation tariffs for new applicants as soon as
legislatively possible, which we expect to be January 2016,”
the department said.
To contact the reporter on this story:
Alex Morales in London at
amorales2@bloomberg.net
To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Randall Hackley, Sarah McGregor