Subsidies for onshore wind farms will be reduced by 10%, not the 25% demanded by the Treasury, says Energy Secretary Ed Davey, but at a long-term cost to carbon emissions.
To win this agreement, the Department has had to concede that gas generation will continue "to play an important part in the energy mix well into and beyond 2030, while meeting our carbon budgets".
This "important part" is ensured with a grant of £500 million for gas field exploration. To put this in context, the dispute between the Treasury and DECC centred over a difference of around just £20 million in support for 1GW of onshore wind.
The effect on greenhouse gas emissions after 2030 is likely to be alarming. David Nussbaum, chief executive of WWF-UK, sent a letter to David Cameron yesterday, complaining of "a clear bias on the part of Mr Osborne towards investment in new gas-fired power stations" which would imperil the UK's climate targets and could raise bills for consumers.
“The proposal that emissions from gas plants built before 2015 will effectively never have to limit their emissions jeopardises our ability to meet UK carbon targets," he said. “The announcement on this, which was slipped out late on a Friday and which had the Chancellor’s fingerprints all over it, is another example of the Treasury’s malign influence on energy policy."
John Sauven, Greenpeace's executive director, also commented that: “The Treasury is fighting tooth and nail to oppose a 2030 decarbonisation target or support for future renewables targets. Mr Osborne has rebranded himself Mr Polluting Gas. It's up to Nick Clegg to stick what's left of Lib Dem principles back into this process."
£25 billion investmentHowever, marine energy developers will celebrate a 250% increase in their support from 2 ROCs (renewable obligation certificates) to 5 ROCs per MWh, subject to a 30MW limit per generating station.
"The case for investment in renewable energy is so strong and that is why, across government, we are backing it," said Energy Secretary Mr. Davey, making the announcement.
He said that representatives of industry and business support the subsidy cut of 10%, but not of 25%. “And that will bring forward investment between £20 and £25 billion between 2013 and 2017, and create hundreds of thousands of jobs," he promised.
"No one would want to over-subsidise an industry," he said.
He tried to reassure the wind industry by saying that there would not be a further change in the support levels or targets for carbon reductions in the autumn.
"The climate legislation says that if there has been a change in any of the generation costs for a renewable technology, whatever it is, we should have a review. So if it does change dramatically, then of course everyone agrees that we should have a review."
When pressed by James Naughtie on the Today programme this morning, Ed Davey said that meeting emission reduction targets depended on carbon capture and storage and nuclear power coming on stream by 2030, as well as major investment in renewables. He did not mention demand reduction.
"We don't have a target for the amount of energy to be generated from renewable sources at the moment," he said. Mr Davey said that there was cross-party agreement on the legally-binding targets to reduce carbon emissions. "What we're discussing is whether there should be an intermediate target for decarbonising the power sector. There is a debate to be had about that, around the Energy Bill," he said. That is expected in the Autumn.
The announcement of the results of the Banding Review consultation for the Renewables Obligation was delayed last week, following intervention from the Treasury, but was finally announced today.
The Department for Energy and Climate Change (DECC) quantified the impact on consumer bills between 2013 and 2015, as a reduction of £6 off household energy bills next year and £5 the year after.
By 2017, DECC hopes that this will deliver as much as 79 TWh of renewable electricity per annum in the UK, 11 TWh more than at present, which still not enough, just 74%, of the 108TWh of electricity needed to meet the UK’s 2020 renewable energy target.
The Renewables Obligation is the Government’s main mechanism for supporting large-scale renewables, and the review covers the final period of support, 2013-17 (2014-17 for offshore wind), before the scheme ends.
The announcement comes ahead of the Government's Global Investment Conference and series of 17 business summits taking place at the British Business Embassy at Lancaster House during the upcoming Games, which aim to secure further investment into the UK.
John Cridland, CBI Director-General, welcomed the announcement, saying it “will help to encourage investment into our energy sector, creating jobs and supporting growth". He also thought that "the Government is right that gas should play a crucial role in any future energy mix. We have argued that there is no need for a false choice between renewables, nuclear, gas, and carbon capture and storage. It’s clear from the evidence that we need a diverse supply.”
Support for onshore wind from 2013-17 will be reduced by 10% to 0.9 ROCs, guaranteed until at least 2014 but could change after then if there is a significant change in generation costs.
If there is evidence of significant reduction of generation costs in early 2013, then subsidies will again reduce in April 2014. The Government will also consider how local communities can have more of a say over, and receive greater economic benefit from, hosting onshore wind farms.
Biomass and solarThere will be a new band to support existing coal plant converting to sustainable biomass fuels. This will increase the amount of renewable energy produced at less cost to consumers.
The new enhanced co-firing band will be split into two new bands: mid-range at 0.6 ROCs/MWh, and high-range co-firing at 0.7 ROCs/MWh in 2013/14, rising to 0.9 ROCs/MWh from 2014/15.
This was welcomed by Dorothy Thompson, Chief Executive of Drax, the country's largest coal burning plant, which is in the process of conversion to be able to burn more and more biomass. She said that she is now “confident that we can transform Drax into a predominantly biomass fuelled generator".
Generators will need to burn at least 50% biomass in a unit to be eligible for support. Bioliquids are excluded from this.
There will be a consultation on lowering the support level for standard co-firing to 0.3 ROCs/MWh in 2013/14 and 2014/15, increasing to 0.5 ROCs/MWh from 2015/16.
Support for generation using 100% biomass is to be set at 1.5 ROCs/MWh, degressing to 1.4 ROCs/MWh for new accreditations and additional capacity added after 31 March 2016.
There will be no immediate reduction in support for large-scale solar, but, as with onshore wind, the level will be kept under review. Installations under 5 MW will only be eligible for feed-in tariff support.
New landfill gas generating capacity will not receive any support from 1 April 2013, but new generators using gas wholly from closed landfill sites will be eligible for support at 0.2 ROCs/MWh and electricity generated using new waste heat to power generating capacity will be eligible for 0.1 ROCs/MWh at both existing stations as well as new stations using gas from any landfill site.
The gas billIn return for this extra 11 TW hours, DECC has given its commitment to a new dash for gas, provided that gas remains cheap.
It will have “a key role in ensuring that we have sufficient capacity both to meet everyday demand and complementing an increasing amount of relatively intermittent and inflexible generation", the DECC statement says. "We do not expect the role of gas to be restricted to providing back up to renewables, and in the longer term we see an important role for gas with CCS."
£500m of grants are being made available for large shallow water gas fields in the UK Continental Shelf, and more information on the Government's strategy will be set out in the Autumn.
The full bill impacts of current bandings and 2013-17 bandings:
|Difference between revised and current bands||-6||-5||1||3|
(Using household electricity demand before the impact of other policies)
|Renewable electricity technologies||Current support (2012-2013) ROCs per MWh||Post-consultation decisions|
|Level of support (ROCs per MWh)||
Comment and other changes
|Advanced gasification||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
||One ACT band supporting ‘standard’ and ‘advanced’ ACTs at the same ROC level|
|Anaerobic digestion||2||2 in 2013.14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17||Closure of band to new projects at or below 5 MW from 1 April 2013, subject to consultation|
|Biomass conversion||No current band but 1.5 ROCs under current banding arrangements||1||New band. Unit by unit approach. No energy crops uplift. Change to definition of relevant fossil fuel generating station.|
|Biomass conversion with CHP||No current band but 2 ROCs under current banding arrangements||1.5 in 2013/14 and 2014/15||New band. Unit by unit approach. No energy crops uplift. Change to the definition of relevant fossil fuel generating station. Close band to new accreditations from 1 April 2015.|
|Co-firing of biomass (standard)||0.5||Solid and gaseous biomass (less than 50% biomass co-fired in a unit): 0.3 (proposed) in 2013/14 and 2014/15; 0.5 from 2015/16.||Unit by unit approach. ROC levels in 2013/14 and 2014/15 subject to further consultation.|
|Bioliquids (less than 100% biomass co-fired in a unit): 0.3 (proposed) in 2013/14 and 2014/15; 0.5 from 2015/16.|
|Co-firing of biomass (enhanced)||No current band but 0.5 ROCs under current banding arrangements||Mid-range co-firing (50-less than 85%): 0.6||New band. Unit by unit approach. Excludes bioliquids (other than energy crops). Cost control mechanism to be introduced, subject to consultation|
|High-range co-firing (85-less than 100%): 0.7 in 2013/14; 0.9 from 2014/15|
|Co-firing of biomass with CHP (standard)||1||0.5 ROC uplift in addition to prevailing ROC support available to new accredit-ations until 31 March 2015||Unit by unit approach. Close band to new accreditations from 1 April 2015.|
|Co-firing of biomass with CHP (enhanced)||No current band but 1 ROC/MWh under current banding arrangements||0.5 ROC uplift in addition to prevailing ROC support available to new accredit-ations until 31 March 2015||New band. Unit by unit approach. Close band to new accreditations from 1 April 2015.|
|Co-firing of energy crops (standard)||1||0.5 ROC uplift in addition to prevailing ROC support for co-firing of biomass (standard). No uplift available for mid-range or high-range co-firing.||Band to be closed, subject to consult-ation. Unit by unit approach. Changes to definition of energy crops.|
|Co-firing of energy crops with CHP (standard)||1.5||0.5 ROC uplift in addition to prevailing ROC support for co-firing of energy crops (standard). Band not available for mid-range or high-range co-firing.||Band to be closed, subject to consultation
Unit by unit approach.
Changes to the definition of energy crops. Close band to new accreditations from 1 April 2015.
|Dedicated biomass||1.5||1.5 until 31 March 2016; 1.4 from 1 April 2016||Introduction of a supplier cap, subject to consultation|
|Dedicated biomass with CHP||2||2 in 2013/14 and 2014/15||Changes proposed to add fossil derived bioliquids, to exclude biomass conversion and to close this band to new accreditations from 1 April 2015|
|Dedicated energy crops||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17||Changes to the definition of energy crops|
|Dedicated energy crops with CHP||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17||Changes to the definition of energy crops.|
|Energy from waste with CHP||1||1||Decision to retain support at current level following consultation|
|Geothermal||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17|
|Hydro-electricity||1||0.7||Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation.|
|Landfill gas||0.25||0 for open landfill sites||New bands for closed landfill sites and Waste Heat to Power.|
|0.2 for closed sites|
|0.1 for new Waste Heat to Power band at open and closed sites.|
|Microgeneration||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17|
|Offshore wind||2 in 2013/14; 1.5 from 2014/15 onwards||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17|
|Onshore wind||1||0.9||Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation|
|Solar photovoltaic||2||Banding proposals subject to re-consultation. Closure of band to new projects at or below 5 MW, from 1 April 2013, subject to consultation.|
|Tidal impoundment (range) – tidal barrage (<1GW)||2||2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17|
|Tidal impoundment (range) – tidal lagoon (<1GW)|
|Tidal stream||2||5 up to a 30 MW project cap. 2 above the cap.|
2 in 2013/14 and 2014/15; 1.9 in 2015/16 and 1.8 in 2016/17
|One ACT band supporting ‘standard’ and ‘advanced’ ACTs at the same ROC level|
Alongside publication of the banding review results, DECC has also published an assessment of how incineration of waste to produce energy and heat can be made more efficient.
DECC has not yet published its impact assessment.