Tuesday, September 1, 2015

Cutting the 'green crap'

Prime Minister David Cameron was alleged to have talked of ‘getting rid of the green crap’, which it was assumed meant, or included, the removal of the various green energy subsidies: http://www.dailymail.co.uk/news/article-2510936/Cut-green-c-p-Camerons-private-view-energy-taxation-horrify-environmental-campaigners.html After his election victory he and his team have set about doing just that. The cuts and changes proposed are stunning.

In a move that had already been put in motion, large solar projects have been blocked from access to the Renewables Obligation support scheme. And now it has been proposed that the support for small PV solar, and other small renewable energy projects, that is offered under the Feed In Tariff  (FiT) system is to be cut dramatically (by up to 87% for domestic PV) and capacity/payment caps set to limit deployment. But if that is not agreed, or is not deemed likely save enough money, the FIT scheme will be withdrawn entirely, early next year. Either way it will hit PV very hard.  In addition, on-shore wind is to be blocked from access to the Renewable Obligation (RO) system and also to the Contacts for Difference (CfD) system, while the planning regime is being changed to allow local objectors more influence.  In future renewables will also be subject to the Climate Change Levy - a scheme designed to support them by penalising fossil fuel use! The Green Deal domestic energy upgrade loan scheme has been wound up and the Green Investment Bank part privatized. The already watered down Zero Carbon Homes scheme has been abandoned.

The impacts will be significant.  There have already been reports of a 78% drop in planning applications for new renewables projects (mainly on shore-wind), while DECC says that overall, under the new wind policies, ‘around 250 projects totalling around 2,500 turbines are now unlikely to be built’. That’s maybe 7GW lost.  In its Impact Assessment, DECC also admits that the proposed new FiT cuts would lead to increased emissions since the gap will be taken up with conventional sources. The capacity cap probably means that only around 170MW of domestic roof top PV solar can be installed annually- compared to 660MW last year and near 4GW in all so far. As the trade lobbies have pointed out, all this will mean jobs will go. And rubbing it in, the imposition of the Climate Change Levy will, it has been estimated, cost the renewables sector around £3.9bn over the next five years. A punitive tax on renewables! 

The right wing press of course was overjoyed by all this, and, with funds shifting over  instead to shale gas, and government support for nuclear continuing unabated,  the prospects for an environmentally sustainable green energy future seem to be receeding.

Is it all as bad as it seems? Renewable energy technology is getting cheaper, in part due to the success of Feed In Tariffs around the world, with PV solar costs falling dramatically, albeit from an initially high level.  So less subsidy should be needed. Indeed soon some renewable energy projects could go ahead subsidy-free. Except that they will have to compete with conventional energy sources, most of which are still subsidized.  Some may be able to, but not many.  A bit more support is needed, and especially for the newer options which have not yet moved down their learning curves. For example marine renewables are developing rapidly but are still expensive, although some claim that they can get down to £100-130/MWh: http://uk.reuters.com/article/2015/08/05/us-tidal-energy-idUKKCN0QA1IX20150805 

By contrast, on-shore wind is already near competitive, with some new projects getting CfD strike prices of below £80/MWh. However, although cheaper than nuclear (Hinkley, if built, will get 92/5/MWh), that’s still more than the price of power from gas plants.  A new Policy Exchange report, ‘Powering Up: The future of onshore wind in the UK’, argues that, rather than being excluded, onshore wind should continue to receive Contracts for Difference, albeit with the subsidies phased out in stages, so that they effectively become 'subsidy free' by 2020. It predicts that this would help the onshore wind industry reduce costs from £85/MWh to approximately £60/MWh by 2020, putting it on a par with new gas plants. www.policyexchange.org.uk/publications/category/item/powering-up-the-future-of-onshore-wind-in-the-uk

The Solar Trade Association has made a similar case for PV solar. It’s Solar Independence report outlines a plan ‘for a stable glide path to subsidy-free solar.’ www.solar-trade.org.uk/solar-independence-plan-for-britain/

A tapered reduction approach to subsidies would certainly make more sense than sudden, abrupt, drastic cuts. As it is, unless these changes and cuts can be blocked or slowed, the renewables industry will have to soldier on and hope that the consumer market for PV (with returns cut to 4-5%) doesn't collapse, and that investors will still come forward for wind projects. So far, despite being the most expensive, offshore wind has escaped the cuts and new projects are still going ahead.  Let’s hope it stays immune…and prospers. Or will the ‘Blue Crap’ get it too?

Cuts seem to be endemic in the UK at present. But when the new FiT review was launched Greg Barker, who until recently was a pro-PV Tory energy minister, offered advice on how to survive them: ‘We need to focus on the fact that this review is a response to much faster and more successful clean energy deployment than anyone expected; exceptional growth that has made the UK the fastest growing solar market in Europe.’ He hoped that the sector would avoid ‘hysteria and self-damaging doom mongering’. Instead ‘the industry needs to work closely with DECC in a genuine spirit of cooperation and financial realism to target and stretch the remaining budget in the current Levy Control Framework, in the most cost effective way possible.’ http://www.solarpowerportal.co.uk/news/barker_urges_solar_industry_to_avoid_hysteria_and_self_damaging_doom_mo3456

Although, after the latest round of proposed PV cuts, offered in a hard-nosed  ‘take it or leave it’ framework, he apparently tweeted that the ‘draft domestic FiT looks very challenging indeed’.  He’s right.  And it seems we might all need to get a bit more angry. The cuts will save small amounts of money (the FiT is said to put around £7 p.a. on consumers bills), but do a lot of damage, potentially killing off a major area of green growth: http://www.carterjonas.co.uk/news-and-events/news-and-press-releases/Aug-15/renewable-energy-support.aspx

It looks grim. Though who knows what the future will bring, with Jeremy Corbyn currently offering some pretty positive energy policy alternatives:  http://www.theecologist.org/Interviews/2978738/jeremy_corbyn_big_six_under_public_control_a_solar_panel_on_every_roof_and_no_new_nukes.html

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