Green policy shakeup continues

July 2015 saw an unprecedented month of changes to green policies, with the Government arguing that subsidies need to be curbed to control the cost of decarbonisation and protect taxpayers. 

In her first major speech as energy and climate change secretary, Amber Rudd (pictured) has re-emphasised the Government’s commitment to tackling climate change cost-effectively amidst a host of decisions to curb spending on core green policies. 

“We are clear that our long-term economic plan goes hand-in-hand with a long-term plan for climate action”, she said. 

“We have to make sure that climate change action is pro-growth, pro-business. That is why our approach will keep the cost of bills down and encourage businesses to innovate, grow and create jobs.”

Policy change

The energy secretary’s speech on 24 July came during a week of highly-criticised policy changes affecting both small-scale and large-scale renewable energy subsidies and funding for energy efficiency:

  • Feed-in Tariff: A consultation has been launched concerning the future of the ‘pre-accreditation’ rules for the Feed-in Tariff (FiT), which guarantee a tariff level for small-scale solar, wind and anaerobic digestion (AD) projects with planning consent before construction begins. Without pre-accreditation, developers will have no guarantee of the level of support they will receive until they reach the accreditation stage. The consultation will be followed be a “wider review of the [FiT] scheme to drive significant further savings”
  • Solar subsidies: A consultation has been launched which proposes removing Renewables Obligation (RO) subsidies for new large solar PV projects up to 5MW from April 2016, a year earlier than planned. It also proposes to remove ‘grandfathering’ for new projects, which guarantee a certain level of subsidy until 2037
  • Biomass subsidies: Following a consultation launched in December 2014, ‘grandfathering’ for biomass conversions and co-firing stations under the RO will now end
  • Green Deal: Government funding for the Green Deal pay-as-you-save energy efficiency programme will now end, meaning that the scheme will no longer be able to offer new finance or funding to help households install energy efficiency measures. The Green Deal’s larger sibling, the Energy Company Obligation (ECO), will continue as planned, with its long-term future to be decided as new energy efficiency policy is developed over the coming months.

The moves come shortly after the Government also announced that renewable-sourced electricity will no longer be exempt from the Climate Change Levy tax and that it will not proceed with a planned ‘zero carbon homes’ carbon offsetting scheme for new housebuilding from 2016. 

Controlling costs

The tough decisions have been taken after news that the Government’s Levy Control Framework (LCF), the budget for green energy subsidies paid for by the taxpayer, is likely to run over its £7.6 billion cap by 2020, due to faster-than-expected renewable energy deployment.

Rudd said: “It’s now time for industry and consumer groups to work with us to make new policy and build a system that works”. 

However, the decision to intervene in so many green policies at once has been widely condemned by business as a major blow to investor confidence. 

Industry backlash

Leonie Greene, head of external affairs at the Solar Trade Association (STA), warned that ending subsidy support for large solar developments so early would leave the market with “nowhere to go”, while Charlotte Morton, chief executive of the Anaerobic Digestion and Bioresources Association (ADBA), added that removing pre-accreditation for FiT subsidies “would move the goalposts after the game has kicked off” for projects that were already in progress.

On the closure of the Green Deal, Julie Hirigoyen, chief executive of the UK Green Building Council, said the “Government’s strategy on dealing with high energy bills through home energy efficiency is now dead in the water. This is yet another announcement with no forewarning that will leave the energy efficiency industry battered and bruised.”

Amber Rudd defended her decisions in front of Parliament’s Energy and Climate Change Committee on 21 July, outlining that a new and more stable policy regime was on the horizon, with energy efficiency at the top of her priorities.

Posted under General Interest on 5 August 2015