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Windfarm Subsidies in the Doldrums
2012-07-18

The Government’s choice yesterday to make no decision on ROC payments [Renewable Energy Certificates] and FITs [Feed-in Tariffs] for onshore wind farms is creating deep concern and uncertainty in the renewables sector of the energy industry.

Northern Farmers who were hoping to make headway with windfarm proposals face only uncertainty and therefore are likely to become the latest victims of the rifts in the coalition’s policy on renewables.

Alistair Fell, Renewable Energy Advisor at H&H Land and Property

Alistair Fell

Government legislation could delay or prevent further windfarm development, which is a key part of the Government’s strategy on meeting its renewable energy obligations. The decision which has been put off until the autumn reflects a long running battle between the treasury to reduce spending and the energy department who wish to protect renewables.

Alastair Fell, Renewable Energy Advisor at H&H Land & Property, believes that the lack of clarity on the issue will harm the wind industry as a whole and may delay investment in both large and farm scale wind turbines, at least until a conclusion is reached.

An announcement from The Department of Energy and Climate Change said ministers were still debating details of the measures, which included a 10% cut in onshore windfarm support. Ed Davey, Liberal Democrat Energy Secretary was hoping to announce a deal by the start of the summer recess of Parliament. He believes that support for the sector is creating jobs in an industry worth £122 billion a year. Conservative Chancellor George Osborne, a Conservative, wants to keep a lid on his electricity bills – his preferred reduction is thought to be 25%. In a further twist, it appears that those areas of Britain most likely to benefit are the rural constituencies of many Conservative MPs. A move to set the figure during the Recess might be made, which could be done to avoid controversy.

Alastair says, “We are still waiting for an outcome to the round two FIT consultation and it looks like this could be delayed, potentially setting back the reduction to the FIT date later than the proposed October 1st 2012. All of this makes it hard for us to advise clients and leaves us second guessing the regulatory system.”

He adds, “We are currently doing due diligence for banks proposing to lend to installations of turbines that will be installed after the FIT cut and neither the banks nor the farmers have any idea if the projects will be economically viable.”

If the Treasury prevails, the massive cut to wind feed in tariffs will be implemented. This would have a massive impact on the market. Unlike solar panels, the wholesale costs of the turbine component parts are not reducing. In any case, delay prevents investment decisions and reduces confidence in the industry. Britain’s target for the next 7 years is an increase in renewable energy from the current 3.8% to 15% by 2012 seems increasingly optimistic. Farmers’ plans to increase their margins, whilst contributing to achieving this target, is looking increasingly vulnerable and uncertain.

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