UK subsidy cut less severe than feared but future targets in jeopardy

» By | Published 25 Jul 2012

Investors and potential investors in onshore wind energy in the UK can breathe a sigh of relief today after the government agreed to cut subsidies by 10% from April 2013, and not 25% as was previously feared.

“Renewable energy will create a multibillion-pound boom for the British economy, driving growth and supporting jobs across the country. The support we’re setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues and show the key role of renewables for our energy security”, Ed Davey, UK Energy Secretary, said.

Industry body RenewableUK welcomed the government’s announcement saying that the certainty it creates will “unlock projects valued at billions of pounds” in a sector that will employ over 12,000 people by 2020.

“The cuts have been made based on evidence of cost reductions within the onshore wind industry so that it offers energy consumers even better value for money”, RenewableUK said, but it also cautioned that the cuts will reduce the growth of the sector by £2 billion with 1,300 fewer jobs created.

The announcement comes amid bitter political wrangling between Liberal Democrat Davey and the Conservative Chancellor George Osborne who was rumoured to be pushing for a 25% subsidy cut probably in response to a group of right-wing, anti-wind energy Conservative MPs. The Guardian billed today’s announcement as a “victory” for the Liberal-Democrat arm of the UK’s coalition government who strongly want the government to keep its pledge to be the greenest ever.

But the battle for the UK’s green future is not yet over. Not only does today’s decision only provide onshore wind subsidy clarity until April 2014, but Osborne is also said to be questioning the UK’s target to decarbonise its electricity sector by 2030 saying that gas could be cheaper and that it is less polluting than coal.

Yet, gas prices are volatile and have previously been proven to drive up UK consumer electricity bills, and, building more gas-fired power stations today would jeopardise long-term climate goals as they would still be operating in 25 years’ time.

A debate on 2030 is due in the autumn. In the meantime, policy makers would do well to remember this quote from the Guardian: “Previous targets, such as the EU-wide goal of generating 20% of energy from renewable sources by 2020, have been widely credited with stimulating billions of investment, which have resulted in the addition of tens of thousands of new green jobs in the UK in the last five years.”



Categories: Climate change