This week, the UK government’s Chancellor of the Exchequer, George Osborne, presented the Comprehensive Spending Review, which fixes spending budgets for each government department up to 2014-15.
Due to the UK’s enormous £109 billion budget gap, this year’s spending review represents the largest programme of public sector cuts in decades. Nevertheless, as the week draws to a close and the dust settles, the renewables industry is somewhat breathing a sign of relief, as the cuts have not affected clean energy spending as much as was first suggested by Chris Huhne, UK Secretary of State for Energy earlier this week.
In short, the Comprehensive Spending Review sees feed-in tariffs (FiTs) for solar power being spared, while £860 million has been earmarked for the Renewable Heat Incentive (RHI), which will come into effect next year and will offer incentives to homeowners to install renewable heat generation systems in their homes. This allocation is more than double that quoted by Huhne earlier in the week and published by Renewable Energy Magazine.
On Tuesday, we also reported that funds to encourage private investment in fledgling green technologies would be watered down from £6 billion to a possible £2 billion and would be channelled through a less robust green fund rather than a Green Investment Bank (GIB). In the end, the Government has given its go-ahead for the GIB to be established, although only with a disappointing £1 billion in state funding.
"The announcement of the GIB is an important signal of the Government's commitment to developing a low-carbon economy. However, it's important to recognise that at the proposed level of capitalisation the GIB will not have sufficient funding to support the hundreds of billions of pounds of investment necessary to construct the energy infrastructure the UK will require over the next two decades. It's crucial that a stable policy framework is put in place to secure that investment from the private sector," said the country's leading renewable energy trade association, RenewableUK's Director of Policy, Gordon Edge.
Offshore wind to benefit
Environmentalists’ disappointment was alleviated however by news that £200 million had been earmarked for developing offshore wind technology and manufacturing at ports sites.
RenewableUK issued a statement yesterday saying that “given the range of cuts necessary to reduce the UK's deficit, the part of the spending review dealing with renewable energy and the environment is credible and considered. The ports funding for which the association lobbied over the past few months by launching an Early Day Motion, an open letter to the Treasury and by raising the issue in the media, seems to have been retained”.
Nonetheless, RenewableUK did warn that the status of the Marine Renewables Development Fund, which allocates funding for wave and tidal, remains unclear at this stage, but emphasised that: “announcements on the Green Investment Bank, the continued support for the Renewable Obligation funding mechanism and the feed-in tariff, has reassured the industry that the Government remains committed to supporting the sector and reaching the 2020 targets on reducing carbon emissions”.
Feed-in tariff cuts may still come
After months of damaging speculation, the Coalition has also revealed that solar feed-in tariff rates will not be altered ahead of schedule*. “The news comes as a huge relief to both the PV industry and investors. However, if evidence emerges that deployment rates are higher than expected the review will take place earlier.
"We are delighted that Government has listened to the Renewable Energy Association," said Gaynor Hartnell, the renewable industry association's Chief Executive. "We urged the Government to look at the evidence rather than be alarmed at the hype. We warned that unjustified and unscheduled cuts would undermine investor confidence across the whole of the renewables industry, at just the time when investment needs to ramp up. Credit is due to the champions of solar power within Government, who see the potential of this technology to transform our energy future.”
“We are grateful that Ministers have understood our concerns and we look forward to working together with them to ensure that our shared objective – that of steady growth, rather than boom and bust – is realised. We shall discuss concerns openly and find a sustainable path forward," Hartnell added.
Finally, the Chancellor of the Exchequer announced a 5% cut in the budget for the Department for Energy and Climate Change per annum. “Overall, the total resource settlement for the Department for Energy and Climate Change will fall by an average 5% a year – but there will be a large increase in capital spending, partly to meet unavoidable commitments on nuclear decommissioning,” he said.
Further details of how the funding held by the Department of Energy and Climate Change will be allocated should emerge on Monday 25 October.
*Solar PV tariff levels will remain at current levels over 2011, and will then be reduced, as planned, by 9% in 2012. The review, already scheduled to take place in 2013, will set out tariff rates for 2013 and beyond. At that review there will be a refocusing on the most cost-effective technologies, to achieve a saving of £40 million in 2014-15.
For additional information:
____________________________________________________________________
