Renewables Subsidy Cut will Slash Wind Farms
Renewable UK dispute the Government claims that shaving 5% from offshore and 10% from onshore wind's share of “Renewable Obligation Certificates” (the government’s method of offering subsidies to renewable power) will have no significant impact on new capacity. The funds for these certificates come from electricity bills and at present cost the average consumer is about £20 per year, significantly less than the hidden subsidies given to fossil fuel generated power.
Wind is radically different from fossil fuel supplies. Virtually all its costs are upfront, stemming from the capital cost of construction and connections to the grid. Wind producers have to take whatever price the market offers when the wind blows – but they still have to pay off the fixed costs of financing the project. If market prices remain low for any length of time they risk bankruptcy. Taking over a bankrupt windfarm would still be good business, it produces electricity at virtually zero marginal cost, but exposure to the vagaries of a market make it a poor investment risk without some form of long term price guarantee.
The government claims the reduction would only deter the most marginal projects, cutting between 350 and 400 MW capacity. Renewable UK argue the real figure would be closer to 1.6 GW – the equivalent to the output of 2 nuclear reactors and enough electricity to power a million homes.
Maria McCaffery, CEO of Renewable UK, maintains the changes would hit smaller community based projects especially hard, saying:
"Any changes need to be carefully balanced as the proposed onshore reduction would have a disproportionate impact on small community-based wind energy projects, as they don't enjoy the economies of scale which larger projects can harness" .
We say: any move by the government that slows down deployment of renewables should be resisted – high fossil fuel costs are a major factor in the current economic crisis and prices will continue to rise in real terms – renewables will help build a more stable financial platform for the UK
images: tim bastable