Government proposes higher subsidies for onshore wind projects on the Scottish islands

Out-Law News | 16 Sep 2013 | 4:02 pm | 2 min. read

Onshore wind developers would be entitled to higher subsidies for siting wind farms in Orkney, Shetland or the Western Isles than for elsewhere in the country under plans put forward by the UK Government.

The Department of Energy and Climate Change (DECC) is consulting on an island-specific 'strike price' of £115 per megawatt hour (MW/h) generated by these projects, to reflect their "unique circumstances and potential". The consultation will last for six weeks, so that the Government can finalise its proposals in time for the publication of the first Electricity Market Reform (EMR) Delivery Plan in December.

"The need for increased support for the islands is something industry has been highlighting for some time and this view was supported by the Government-funded Redpoint report back in May," said renewable energy expert Nicholas Shenken of Pinsent Masons, the law firm behind "The considerable grid connection costs associated with projects on the Scottish Islands remain, but there can be little doubt that this is a move in the right direction."

"Nonetheless, as usual there are still question marks - such as what will be proposed in relation to wave and tidal energy, since the new strike prices proposed will only cover onshore wind. And, of course, will a strike price of £115MW/h be enough to unlock onshore wind investment on all the islands? For example, the Redpoint report indicated that the Western Isles may need more support than anywhere else to reflect a variety of specific factors there, whereas what is being proposed is a flat £15MW/h of additional support across the board," he said.

The new strike prices will guarantee what the National Grid will pay for renewable energy generation from 2014. The rates will be governed by new Contracts for Difference (CfDs) with suppliers, which will be created by the Energy Bill once in force. The Government published proposed strike prices for a range of renewable technologies in July, and the subsidy mechanism will also be extended to new nuclear and carbon capture and storage (CCS).

The proposed strike price for island projects is £115/MWh; £15 higher than the £100/MWh proposed for mainland onshore wind projects in June. The mainland strike price for onshore wind will be guaranteed through to 2016/17, when it is then due to fall to £95/MWh to reflect the falling cost of the technology. The island-specific strike price is intended to encourage investment in up to 400MW of onshore wind capacity on the Scottish Islands by 2020, according to the Government.

Speaking ahead of the Liberal Democrats' party conference, Energy Secretary Ed Davey said that the proposal was "good news for the future of renewable in Scotland".

"An independent report showed that the specific circumstances of the Scottish Islands required a different approach that breaks the mould of the wider UK strike price mechanism, and we are delivering that," he told Utility Week.

"It is now down to investors to come forward and work with us to ensure the Scottish Islands share in renewable technology and UK-wide green growth," he said.