REA responds to latest CfD proposals and move to constrain solar farms

Little clarity or comfort, and much new instability and confusion, for British renewable power companies ---Silver lining is Government proposal to challenge State Aid guidelines in support of community energy

The REA is disappointed that today's consultations on the Renewables Obligation (RO) and Contracts for Difference (CfDs) create more uncertainty and instability for most renewable power industries [1]. Some CfD proposals, such as the treatment of biomass conversions and onshore wind on the Scottish Islands, will remain unclear until DECC publishes details of CfD budgeting arrangements. Proposals to close the RO for 5MW+ solar farms, meanwhile, simply create very damaging instability to existing policy. Government has however made a bold move today to look at raising the community energy Feed-in Tariff threshold to 10MW, but lingering questions of how all these proposals will interact with new State Aid rules creates a perfect policy storm for renewable electricity developers.

REA Chief Executive Dr Nina Skorupska said:

"Clear, stable policy attracts investment, creates jobs and drives growth and cost reductions in renewable energy technologies. However, there is not much clarity or stability on show today. The piecemeal approach to the CfD scheme leaves a lot of questions still unanswered, and the lack of capacity ring-fencing for most technologies compounds that uncertainty. Without knowing what DECC intends to do in terms of setting out the budget, making sense of CfD proposals is like trying to complete a jigsaw puzzle without seeing the picture on the lid.

"Solar power meanwhile is subjected yet again to devastating instability. Government must ensure that policy drives and rewards technology cost reductions with a stable trajectory of gradually declining financial support, not the cliff edge the Government is proposing for solar."

Capacity ring-fencing

The REA welcomes proposals to ring-fence minimum capacity for wave and tidal stream power in the RO and CfDs, but continues to call on Government to extend minima to other technologies. As well as marine renewables, the UK is also well placed to take a global lead in energy from the gasification and pyrolysis of wastes. Minima for these technologies, as well as geothermal power and anaerobic digestion, would help them innovate and scale up. Likewise a minimum CfD allocation for solar power would help keep solar's extraordinary cost reductions on track (as they are put at risk by today's proposal to exclude 5MW+ solar from the RO from April next year).

Setting out the budget

Minima are particularly important for "less established" technologies, as they compete for funding with offshore wind (and possibly onshore wind on the Scottish Islands), which has a deployment forecast 10 times the size of all the other "less established" technologies combined. Without knowing how much budget will be allocated to each element of the CfD scheme, there remains a risk that these technologies could be totally squeezed out. Similarly, it is impossible to draw reasonable conclusions on the treatment of coal plants converting to biomass without knowing how much budget will be made available to this sector. We urge Government to make its thinking clear on CfD budgets as soon as possible.

Community Feed-in Tariffs and State Aid rules

The REA is pleased that Government today consulted on increasing the Feed-in Tariff threshold for community renewable electricity schemes, from 5MW to 10MW. This shows the Government is serious about its Community Energy Strategy [2], as the European Commission's new State Aid Guidelines for renewables actually seek to reduce most Feed-in Tariff thresholds [3]. This is a risk for all players involved in medium scale renewable electricity – not just communities, but farmers, local authorities and businesses too – and the REA continues to urge the Government to ensure the State Aid Guidelines do not impact on these sectors.

REA Chief Executive Dr Nina Skorupska said:

"We really want to see much greater community involvement in the energy mix, something renewable energy is uniquely able to facilitate. It's encouraging to see Government pushing back against the Commission's State Aid Guidelines to ensure greater diversity and competition in our electricity supply.

"Renewable energy reduces carbon emissions, can be built quickly to address the capacity crunch, and can crack open the energy market to wider involvement with SMEs, local authorities, farmers and communities. The 100,000 employees in UK renewables need more of this kind of championing from the Government." [4]

The Solar Trade Association, which is affiliated to the REA, has also responded to the proposals to exclude 5MW+ solar farms from the RO [5] and produced a background briefing on the policy framework for large scale solar farms and mid-scale rooftop solar projects [6].

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