Ahead of Amber Rudd’s evidence session at the Select Committee on Energy and Climate Change today, read New Power’s take on the recent RO announcement, published in the July issue. We saw little room in the CfD auction, and a threat over FITs.
Plans to close the Renewables Obligation (RO) to wind projects in April 2016 will save the bill payer “hundreds of millions of pounds”, said secretary of state Amber Rudd when she announced the closure in June.
The secretary of state was fulfilling a Conservative manifesto promise that there would be no new subsidies for onshore wind. She said the market delivery plan for Electricity Market Reform (EMR) had projected a requirement for 11-13GW from onshore wind by 2020 and “we have enough onshore wind in the pipeline, including projects that have planning permission, to meet that requirement comfortably”.
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Although the RO will close on 1 April next year, Rudd said a “grace period” would give access to projects that had planning consent, a grid connection and evidence of land rights as of 18 June 2015.
Rudd estimated that “250 projects, totaling 2,500 turbines, are unlikely to be built” as a result of closing the RO early – a total capacity of 7.1GW.
Lawyers Addleshaw Goddard said of the grace period, “This is not set in stone and there will be a consultation period before the legislation is implemented which will cause further delay and uncertainty.”
The secretary of state claimed the RO cost £800 million in 2014, when onshore wind made up 5% of electricity generation. Closing the RO would save “hundreds of millions of pounds”, she told MPs.
Rudd also cast some doubt over the likely allocation for wind in the planned auction for contracts for difference (CfDs). Asked by David Hansen MP (Labour, Delyn) to confirm whether there will be a new round of CfDs and whether onshore wind would feature, she said “in respect of contacts for difference, we would be implementing the terms of our manifesto” and promised to “say more about CfDs in due course”.
The budget allocation for CfDs is due to be announced in July and previously the government indicated that £50 million would be available in the “pot” for developed technologies, which includes both onshore wind and PV. But Robin Cohen, vice president at Charles River Associates, explained that if developers submit projects that had been expected to beat the RO deadline into the CfD auction, it would result in low bids and displace projects that are further down the development pipeline.
“There will be excess supply and that will squeeze the budget anyway,” he said, “Then the former RO projects will be coming in more ‘fully cooked’. This means they will have higher sunk costs and the more competitive bidders recognising the excess supply will accept these as potential losses. It will drive down bids.”
What’s more, because companies can submit so-called ‘flex’ bids into future years, RO projects could populate future allocations for developed technologies. That could leave later projects waiting years for a chance to bid for CfDs.
Rudd also said she would be “considering options for future support for community wind projects”, saying that although she did not want to “stand in the way” of communities, the projects must be “affordable as well as acceptable”. She noted that Decc would be conducting a review of feed-in tariffs later this year.
Overall, Rudd said Decc projected that the total amount of wind deployed under the RO would total around 11.6GW, and the total including that supported by CfDs would be 12.3GW by 2020, providing 10% of UK generation.
Rudd acknowledged that the decision to close the RO would disproportionately affect projects in Scotland – she said 68% of the onshore wind pipeline related to Scottish projects. She promised to consult with Scottish ministers. Scottish energy minister Fergus Ewing reacted to the announcement by suggesting it might face judicial review.
Planning decisions to devolve
Rudd also announced a change in planning requirements that will “change the law so local people have the final say on onshore wind applications”. That power will be devolved in the forthcoming energy bill but has also been supported by the Department for Communities and Local Government, which has already set out new considerations to apply to wind power. Rudd said it was “right” that decisions on different renewables technologies should have different frameworks.
Planning lawyer and blogger Angus Walker of Bircham Dyson Bell made two points about the CLG statement. First, new turbine projects must be supported by a neighbourhood plan – even if it means one has to be written. Second, local people must “demonstrably support the proposal” even if it is for just one turbine and impacts “must be addressed”. Walker suggests that may mean having a local referendum on the project.
Walker also points out that projects over 50MW will be dealt with under the Planning Act 2008 until the new energy bill is passed.
On Rudd’s firm confirmation to two MPs that local council decisions on wind farms could not be overruled by the planning inspectorate, Walker said the right to appeal could not be removed “by a few words from a minister” and her remarks “remain out there”.
In her statement to the House of Commons the secretary of state reaffirmed her commitment to reducing greenhouse gas emissions and gave some hints on the likely direction for support. “We support the desire to make sure that we address the issue of climate change: the problem is that we do not want large-scale solar,” she said.
As the government cuts back on support for onshore wind and PV, the secretary of state gave hints on where the government saw further expansion in renewables.
Answering a question from Peter Lilley MP about support for offshore wind farms she said, “we will not reduce those” – noting that “we have more offshore wind than the rest of the world put together and hope to become a serious exporter of it,” but she also said, “now that we have a market led system through the CfD we are able to push for a reduction in prices”.
She responded positively to several MPs’ comments in support of Tidal Lagoon Power’s Swansea Bay project.
Speaking later in the week to the Carbon Capture and Storage Association she said that technology would be an “important part of reaching our goals”. She said government was “determined to maintain a leading role” in Europe on the technology, because “we get flexibility and we can continue to use indigenous resources” and extend the role of the North Sea. She made a “personal commitment” to moving the technology towards commercial scale, saying she wanted to “build a hub industry in the UK” providing skills and expertise.
Two CCS projects, at Peterhead in Scotland and the “White Rose” project, in Yorkshire, are expected to make final investment decisions late this year and bid for further government capital funding early next year. The two projects will also be negotiating CfDs to support operation.