UK government subsidy programme for new onshore wind projects to end next year

Out-Law News | 19 Jun 2015 | 12:16 pm | 2 min. read

New onshore wind generating facilities would no longer be entitled to apply for public support from April 2016 under plans put forward by the UK government.

It plans to close the Renewables Obligation (RO) subsidy programme to projects in England, Wales and Scotland, one year before the scheme closes to all projects and is replaced by the new Contracts for Difference (CfD) subsidy mechanism. Projects that have already been granted planning consent, a grid connection offer and acceptance and evidence of land rights for the site by 18 June 2015 may be entitled to a 'grace period', according to the announcement.

Energy projects expert Michael Watson of Pinsent Masons, the law firm behind, said that the news would not be welcomed by developers with planned projects that had not yet obtained the necessary permissions.

"This announcement may play well to the gallery, but it will be devastating to some developers," he said.

"It also sends out a damaging signal to investors at a time when the UK is desperately seeking investment into energy infrastructure. On the back of EMR [electricity market reform] and changes to solar policy, what this highlights is a continued disconnect between the long-term commitments expected by investors and short-term political thinking," he said.

The RO was previously the government's main financial support mechanism for large-scale renewable electricity generation projects, but it is due to be phased out entirely by 31 March 2017. It will ultimately be replaced by the more competitive CfD mechanism, under which 27 projects have already been offered contracts. Developers of more established renewables, including onshore wind, must bid for a place on the CfD programme based on the lowest guaranteed price per megawatt hour (MWh) that they are willing to accept.

The government intends to implement the changes to the RO through primary legislation, requiring only the approval of the UK parliament rather than a lengthy consultation process. It has already restricted the scope of the RO to exclude solar projects with generating capacity of 5MW or above from 1 April 2015, and capped subsidies available for biomass. These and other 'established' renewable technologies are grouped together for the purposes of the CfD programme, and expected to compete with each other on price.

Onshore wind generated 5% of the UK's total electricity in 2014, supported by over £800 million in subsidies, according to government figures. Energy secretary Amber Rudd said that the volume of generating capacity either already in operation or in the pipeline meant that the UK was "well on the way" to meeting its climate change targets. The Conservative party promised to end publicly-funded support for onshore wind projects as part of its 2015 general election manifesto, and the new government is also taking forward proposals to give local communities more of a say in where onshore windfarms are built.

"We have a long-term plan to keep the lights on and our homes warm, power the economy with cleaner energy, and keep bills as low as possible for hard-working families," said Rudd.

"We want to help technologies stand on their own two feet, not encourage a reliance on public subsidies. So we are driving forward our commitment to end new onshore wind subsidies and give local communities the final say over any new windfarms. Onshore wind is an important part of our energy mix and we now have enough subsidised projects in the pipeline to meet our renewable energy commitments," she said.

The government would consider whether and how to change the support offered to community energy wind generation projects as part of a planned review of the feed-in tariff (FiT) support mechanism for smaller scale generation later this year, she said.