UK to cut solar subsidies, boost offshore wind support

According to the BBC, the British government is set to introduce wide-ranging changes to the United Kingdom’s renewable energy subsidies, including a reduction in support for solar and onshore wind energy and a boost for offshore wind power.

The BBC cited Chief Secretary to the Treasury Danny Alexander, who described the subsidy revamp as "a rebalancing" and said overall spending would not change.

While the final figures have yet to be officially announced, fixed prices for solar and onshore wind power will be cut from 2015, while those for offshore wind power will go up.

The changes to renewable energy subsidies comes ahead of Chancellor George Osborne’s Autumn Statement, a review of the government’s tax and spending policies midway through the annual budget cycle, which he will deliver to MPs on Thursday.

Government sources said there had been so much investment in solar and onshore wind energy that they no longer needed so much state support, the BBC reported, citing sources from both government coalition parties. In contrast, they said, offshore wind sources still lacked sufficient subsidies needed to encourage long-term investment.

British subsidies for renewable energy take the form of “strike prices,” which are set substantially above the current value of energy for the long term to encourage private investment.

The BBC said sources expected "quite a dramatic cut" in prices for onshore wind in 2015 and beyond and saw the move as the "beginning of the end for mature renewables."

"We are in a very good place,” the BBC quoted an unnamed source. "If we didn’t curtail onshore a bit, we would have so much onshore that the constraint wouldn’t be financial but political. Ditto solar."

The source added that constraining solar and onshore made "good value for money sense" by allowing the sector to move quicker than expected to market forces, "and enables us to ensure that the one renewable technology that can go to scale in the 2020s — offshore wind — gets the early support that an immature technology needs."

The U.K.’s Renewable Energy Agency (REA) trade association welcomed the government’s confirmation of support levels for renewable power under the new Electricity Market Reform (EMR) policy, saying, "Industry’s major concern though is the detailed policy design. The renewable energy industry is a broad church, and it is vital that a wide range of businesses and technologies are effectively supported, especially independent generators."

REA chief executive Nina Skorupska said, "The spin in Westminster and the media today is disappointing but not surprising," adding that today was actually a good news day for renewable electricity.

"The real reason that support for solar and onshore wind will go down is that they are leading the race for cost-competitiveness with fossil fuels. Government policy is working and bringing down costs. The important thing is that decisions are evidence-based, not purely political, and we need to see the methodology to assess that."

British Energy Minister Michael Fallon hinted at the coming changes in a speech earlier this week, saying the government would announce shortly "the final support prices for each renewable technology. Of course new power has to be paid for and we should be open about that. But investment in renewables cannot be done at any price. It must be affordable for consumers. And the cost of that new investment needs to be spread more fairly, much more fairly."

The REA on Monday called on Osborne to use the autumn statement to remove the policy uncertainty that has dogged renewables investors in the U.K. and to "send a clear signal … that the long-term security of our energy system and our climate is more important than short-term political point-scoring."