Government vows to fast-track renewable energy support decision

The government has today announced it will fast-track a decision on the level of support offered to renewable energy projects post-2012, despite industry speculation the entire regime of low-carbon energy incentives will be overhauled as part of the coalition’s imminent electricity market reforms.

Energy minister Charles Hendry today revealed the decision on the level of support offered from April 2013 to renewable electricity projects through the Renewable Obligation (RO) scheme will now be announced in July next year, providing investors with greater certainty over the level of incentives that will be available.

Under previous plans, the decision on support levels could have been made as late as Autumn 2012, prompting developers to voice concerns there was no point them beginning work on new projects if they could not be sure of the level of support available through the RO.

“The previous timetable for reviewing support for large-scale renewable electricity developments created some uncertainty for investors, so we’ve decided to bring it forward,” Hendry said. “Taking this action will help us realise our full potential for growth in renewable electricity. We think we’ve found the right balance between speeding up the process and making sure our decisions are based on solid analysis.”

Some industry insiders welcomed the move, with one source confirming the lack of clarity over support post-2012 was contributing to a “hiatus” in renewable energy investment.

“This is positive news and it will bring some much needed certainty into the timetable,” he added.

However, David Williams, chairman of the Renewable Energy Association’s biomass group, said the sector had been hoping the decision would be made sooner still.

“The biomass industry is waiting for a decision as investment that is ready to go is currently being held up because firms do not know the level of support they will get when facilities are completed,” he said. “We were hoping the decision would be made in March, but now we will have to wait until the summer. It is unbelievable the government can spin this as speeding up the process.”

Under the RO, renewable energy generators sell Renewable Obligation Certificates (ROC) alongside any energy they produce, allowing them to bolster their income to a level where projects become economically viable.

However, some emerging renewable energy sectors, such as marine and geothermal energy, have argued they need to receive higher levels of support if they are to attract investment, while critics have argued the level of support offered to more established renewable energy technologies, such as wind farms, should be reduced.

The government is also being called upon to standardise the level of support for marine energy technologies after the Scottish government offered five ROCs for each MWh generated by wave energy projects and three ROCs per MWh for tidal energy projects, delivering a significantly higher level of support than the two ROCs per MWh given to marine energy projects in the rest of the UK.

However, industry insiders said the significance of the government’s decision on ROCs would largely depend upon its electricity market reform proposals, which are expected to be released next week and are widely regarded as the biggest shake-up of the energy sector in a generation.

One source, speaking on condition of anonymity, said the government was looking at phasing out the RO scheme and replacing it with a “contract for difference” mechanism that would effectively guarantee a price for energy generated from low-carbon sources.

“Any decision on the RO will be overshadowed by the electricity market reforms as DECC could look to grandfather the scheme and replace it with something else,” he said, adding that officials were currently investigating a mechanism that would cover all forms of low-carbon energy and would require firms purchasing energy to cover the difference between the wholesale price of energy and a set minimum price.

“The contract for difference would work in much the same way as a feed-in tariff but for larger projects,” he explained, adding that support for the concept was building within DECC with officials regarding the approach as more efficient and stable than the current RO.

A spokesman for DECC declined to comment on the precise details of the electricity market reforms, but he admitted the new proposals would include a “mechanism to reduce revenue uncertainty for low-carbon generation”, citing the establishment of a full system of feed-in tariffs as an example of the proposals under consideration.

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