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Can We Control Regulatory Instability?

It is easy in the world of renewable energy to feel like a wind-blown leaf. Despite the sector's drive and ingenuity — and all its technological advances and efficiency records — it seems doomed to eternal reliance on shifting government policy and the largesse of typically short-lived administrations for the cash it needs to grow.

As a result, the sector can sometimes appear simultaneously on the brink of a long-awaited breakthrough and imminent collapse.

A recent (September-October 2011) edition of REW highlighted this issue by inviting comment on the new Renewable Heat Incentive (RHI), a flagship program to support the expansion of renewable heating in the U.K. Inevitably, the responses overwhelmingly called for regulatory stability if investment, growth and a sustainable renewable heating market are to be achieved.

Now, though, this unique experiment has run aground on the eve of its launch, with the U.K. government embarrassingly forced by the intervention of the European Commission to announce a two-month delay. State aid must be approved for the scheme to go ahead and the European Commission has expressed concerns that the tariffs for biomass installations are set too high. Consequently, the scheme cannot be launched as a whole until the biomass tariff is changed, which will require regulations to be re-submitted to Parliament.

Confidence in this — or indeed any — government's commitment to a green energy agenda has been dealt another body blow, with the exasperated industry's investment plans in turmoil yet again, apparently on a whim. Indeed, in this case, the final decision came just hours before the RHI was due to come into force.

It is easy to see why such decisions provoke anger. The Country Land and Business Association (CLA) trade group expects its members to lose out through wasted preparations. "Many CLA members have been gearing up to launch projects on 30 September, while others have already taken the plunge and will face cash flow problems as a direct result of the Commission's intervention," said its president William Worsley. The bungled launch was described as "desperately disappointing" by Paul Thompson, head of policy for the Renewable Energy Association (REA).

Whatever the reasoning behind it, the European Commission's move can only erode already low confidence in the renewables industry and heighten uncertainty over the long-term prospects for feed-in tariffs and other support mechanisms.

If the renewables business is to attract the vital investment that can bring jobs and industry to Europe and elsewhere, it must ensure policymakers address the crucial stumbling block of regulatory instability.

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