LONDON (Alliance News) - UK Secretary of Energy and Climate Change Amber Rudd on Wednesday scrapped further renewable energy subsidies, specifically for solar and biomass, in the new Conservative government's latest move to try to control what it considers over-expenditure and spiralling consumer bills.
Last week, press reports revealed the Department of Energy and Climate Change had already overspent its budget to support renewable energy projects over the next five years by GBP1.50 billion, which the Telegraph said caused household energy bills to rise GBP120 per year as a direct result of "ill-thought-through" climate change policies and the costs of running energy networks.
Subsidies for green energy are allocated by the government but paid for through energy bill levies. They are subject to a Treasury-set spending cap, but the Department has exceeded the cap in each of the last three years and is likely to do so again, the Telegraph said in agreement with other media stories last week.
On Wednesday, Rudd said it was a government priority to reduce household bills and said it has driven down the cost of renewable energy enough for parts of the industry to "survive without subsidies".
Rudd laid out her proposed revised measures to try to bring down the cost of subsidising the industry which focuses on solar farms with a capacity under 5 megawatts - not including household rooftop panels - and biomass.
For the small solar farms, they will be hit by a similar fate as the recently scrapped Renewables Obligation subsidy. The government said the sector had grown strongly through the Feed-In-Tariff scheme and the Renewables Obligation, but it said current forecasts suggest the costs of supporting this will rise to GBP9.1 billion in fiscal 2021 from a previous estimate of GBP7.1 billion.
"It is therefore necessary for the Department of Energy and Climate Change to take action to control costs," the government said.
The Renewables Obligation was introduced in 2002, and places an obligation on UK electricity suppliers to source an increasing proportion of the electricity they supply from renewable sources.
"Our monitoring indicates that solar PV deployment is likely to be significantly greater than previously anticipated. The level of deployment in response to support provided has driven down the generation costs of solar PV significantly, and these are continuing to fall, making it easier in our view for the industry to succeed without support and suggesting that future projects could be overcompensated at current levels of support," the government added.
In June, the government said it would scrap the Renewables Obligation, which is the primary of three subsidies for renewable energy and which at the time was targeting onshore wind farms. However, on Wednesday the DECC proposed closing the Renewables Obligation to small solar farms as well from April 1, 2016.
It also proposed removing grandfathering for small solar farms. Grandfathering is a provision in which an old rule continues to apply to some existing situations while a new rule will apply to all future cases.
The DECC said it will publish a final decision on its proposals after the start of September, once a consultation process will be completed.
For biomass energy generation, the DECC said that following a consultation it has concluded that many companies would be able to benefit from the Renewables Obligation, much more than originally expected.
The DECC said: "The support rate under the Renewables Obligation for new biomass conversion and co-firing stations and combustion units should no longer be covered by government's grandfathering policy."
"This policy change will also apply to generating stations or combustion units that are already receiving support under the Renewables Obligation and move for the first time into the mid-range co-firing, high-range co-firing or biomass conversion bands," it added.
Those proposed changes, if they go ahead, would be back-dated to December 12, 2014. However there are some exceptions for stations or units subject to a final investment decision or units that have moved into the mid-to-high range of co-firing bands that were generating electricity before December 12.
"Our support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We?re taking action to protect consumers, whilst protecting existing investment," said Rudd Wednesday.
It is the latest in an ongoing attack by the UK government on the renewable energy industry, which has seen Chancellor George Osborne scrap the "out-dated" climate change levy, which was introduced in 2001 with the aim of improving energy efficiency and increase demand for renewable energy.
That caused renewable companies' shares to fall, most notably Drax Group PLC after it warned earnings would be GBP30 million lower in 2015 and GBP60 million lower in 2016. Wind operator Infinis Energy was also hit by the changes alongside a band of smaller companies.
Drax Group shares were trading flat at 272.10 pence per share Wednesday, while Infinis Energy shares were up 1.3% at 157.30p.
In June, the UK government also said it would sell a stake in the Green Investment Bank over the next years, three years after the unit was established in order to invest in long-term energy and infrastructure projects in Britain. That sale is expected to see the government cut its stake in the bank by at least half.
The UK government also said prior to, and after, the general election win in May that it will support the shale gas and fracking industry in the UK, especially in the north of England, despite some public and political opposition.
The Conservatives promised to set up a sovereign wealth fund for the North of England, part of its "Northern Powerhouse" campaign, which would lead to the shale gas resources of the North being used to invest in the future of the North.
However, the government's plan suffered a setback when two fracking applications made by Cuadrilla Resources were rejected by Lancashire County Council last month over concerns about traffic and the "industrialisation of the countryside".
The fracking argument continues though, as the attention turns to Yorkshire where a proposed site is being considered. Third Energy, a company which has already drilled a well on its Kirby Misperton site near Thirsk and Malton in North Yorkshire, is now hoping to become the first company to frack in the UK since Cuadrilla's first well back in 2011.
North York Moors National Park in Yorkshire also gave the green light for Sirius Minerals PLC to build the world's largest potash mine last month.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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