UK: expect little other than zero subsidy solar


Last Friday’s news across the U.K. energy Twittersphere revolved around French utility EDF scheduling a meeting of its board of directors for 28 July. The meeting agenda “includes the final investment decision for the construction of two EPR reactors at Hinkley Point C (HPC) in the south-west of England,” said EDF’s press release.

The 3.2 GW Hinkley Point C nuclear plant is the latest U.K. government-delivered policy blow in favor of a centralized energy system. But the most apparent policy effort to preserve the centralized character of the U.K.’s energy system is the Electricity Market Reform (EMR), which was ratified in 2014.

New CfD auctions for solar?

The Westminster Energy, Environment and Transport Forum organized a conference recently titled “Delivering Electricity Market Reform and priorities for new Contracts for Difference.”

The Contracts for Difference (CfDs) are the EMR’s mechanism to subsidize renewable energy. Fossil fuels-based generation is supported via the Capacity Market scheme and, rather ironically, the U.K. – the world’s former liberalization poster child – subsidizes every form of electricity generation currently.

However, solar PV and onshore wind appear to be the first forms of electricity generation not to be subsidized in the future.

Speaking at the conference, Declan Burke, head of CfD design and low carbon technologies at the former Department of Energy and Climate Change (DECC), which was scrapped hours after the conference ended, constantly avoided hinting at any new CfD auction capacity regarding Pot 1: the auction category concerning established renewable energy technologies such solar PV and onshore wind.

On the contrary, he was certain that the government will auction new capacity for less established renewable energy technologies like offshore wind and wave power. The details of this auction will be announced by the end of the year, Burke said.

According to the budget announced in March, the U.K. will run another two CfD auctions by the end of this parliament life in 2020. However, although delegates kept asking when, and if at all, a new CfD auction for solar PV would place, Burke dodged the issue.

He was adamant, however, that the EMR design does not need radical changes and specifically the CfD mechanism works rather well because it delivers scalable, low-carbon capacity.

Burke also said the government is interested in projects with scale because such projects can deliver on the U.K.’s low carbon targets. Scale is something solar could deliver too, he added, but again there were no comments if solar should do this with or without subsidies.

Interestingly, a lot of delegates were asking Burke whether the market should be left to do the job alone, without the state having to decide who is getting the subsidies for renewable energies. Burke’s reply was that “neutrality is very important for the government” but again there was no sign of any will to change the CfD process.

Of course, in the hours following the Westminster Energy Forum, a new department took the place of the former DECC. But it would be naïve to expect any real changes in the country’s electricity policy. The state will continue to decide which forms of energy will be built, and the new ministers are not expected to pick different policy winners and losers.

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