UK cap on renewable subsidies harms solar, says industry

Representatives of the U.K.’s renewable energy and solar industries have criticized today’s announcement by the Department of Energy & Climate Change (DECC) to place a £200 million ($340 million) cap on subsidies for the leading forms of renewable energy from October.

Under the controversial Contracts for Difference (CfD) scheme, the funds will be spread across three different pots of technologies. Large-scale solar has been grouped in Pot 1, where it must compete with onshore wind and conventional-waste-to-energy technologies for the £50 million ($85 million) per year allocated to it.

Pot 2, in contrast, has been allocated the bulk of the monies – £155 million ($263 million) – and comprises less-established and more expensive technologies that must fight it out for the allocated funds. This decision has angered solar and renewable energy advocates in the U.K., who have accused the energy secretary, Ed Davey, of "stacking the deck against solar".

"The message the government is sending out today is clear – it is backing nuclear and other more expensive renewables over value-for-money solar," said Leonie Greene, head of external affairs at the Solar Trade Association (STA). "This is an absurd decision that will ultimately hit bill payers across the U.K."

The CfD scheme is a new funding mechanism that the DECC claims will help propel the decarbonization of the U.K.’s energy market without impacting on consumers’ electricity bills. In announcing the funding limit, Davey said: "Our plan is powering growth and jobs as we build clean, secure electricity infrastructure for the future. By radically reforming the electricity markets, we are making sure that decarbonizing the power sector will come at the lowest possible cost to consumers."

The DECC calculates that these measures will shave 6% (approx $60) off the average monthly electricity bill, and nurture the creation of 250,000 clean energy jobs. However, the STA argues that the CfD scheme, in its complexity, disadvantages the small- and medium-sized business that dominate the solar sector in the U.K., and instead favors multinational utilities that can outbid their solar rivals at auction.

"The point is that only large-scale (>5 MW) solar, which was on track to being subsidy-free, is being exposed to this new CfD system without having the back-up of an old scheme," said Greene. "The government needs to fix that by guaranteeing a minimum amount of funds for solar."

Blow for renewables

Under a similar scheme, the U.K.’s nuclear industry has received close to £80 billion in subsidy backing, while the STA calculates that today’s announcement amounts to a cut in support of between 65% and 80% for large-scale solar installations once the withdrawal of the Renewable Obligation (RO) certificate is factored in from next April.

The Renewable Energy Association (REA), while recognizing the need for the government to limit the cost of renewables subsidies to consumers, was also critical of the DECC’s tilt away from clean-energy support, especially among the more established technologies such as solar power.

"The limited funding for several key technologies will send shockwaves through the industry," said REA chief executive Nina Skorupska. "It is really important not to lose sight of the bigger picture. Ultimately, all renewables, not just in power but in heating and transport too, are really competing with fossil fuels that are mostly imported from overseas and damage the climate."

The energy minister’s rhetoric of striking a fair balance between a cleaner future and lower energy bills for consumers was also criticized by the REA, with Skorupska adding that while cost-effectiveness is important, the "DECC cannot say that this planned budget delivers value for money for the consumer", adding: "The best way to square the circle is by properly funding the cheaper technologies and introducing minimum deployment guarantees for all technologies."

A minimum deployment guarantee would, Skoruspka claimed, aid the steady deployment of clean energy projects across all major renewable sectors, particularly solar. Without it, industry experts fear that many solar projects are in danger of being scrapped, and fewer low-carbon installations could be built as a result.

The head of the REA, Paul Thompson, remarked that it is vital that cost-effective technologies such as solar and onshore wind are given sufficient budget to minimize the short-term costs for customers – something the CfD fails to provide; and that the CfD also fosters a conducive environment for early-stage clean technologies such as geothermal, wave and tidal power – something the CfD appears set up to do.

Finlay Colville of NPD Solarbuzz told pv magazine that the realities of the CfD will remain unknown until Fall, when the new funding policies are formally implemented.

"The key issue for the U.K. solar industry under CfDs remains the capacity set to be allocated under the first auction round in September, the strike prices bid for, whether onshore wind will really keep to RO funding, and what is left in the Control Levy Framework pot out to 2021 for renewables," Colville said.