Hydropower, Project Development, Solar

U.K. Plans to End Aid to Small-Scale Renewables in Blow to Solar

The U.K. proposed to end an assistance program for small-scale renewable energy projects as part of a drive to cut the costs to consumers of subsidizing clean technologies.

Ministers plan to cap the budget for the assistance and end it for new entrants after March 2019, according to the proposals outlined Thursday on the Department of Energy and Climate Change website. If it isn’t possible to rein in spending, the program of guaranteed electricity prices, known as feed-in tariffs, may close in January, it said.

The tariff program “has exceeded all renewable energy deployment expectations,” the government said. “However, this deployment success has also come with costs exceeding our projections.”

The announcement is a blow to the solar industry, which accounts for more than four-fifths of all installations under the program, according to Bloomberg calculations. Energy Secretary Amber Rudd has ended or reduced a slew of clean energy programs since her Conservative Party won the general election in May, saying her actions are designed to protect consumers who pay for the subsidies on gas and power bills.

Thursday’s proposals “would be hugely damaging for the U.K. solar industry,” said Mike Landy, head of policy at the Solar Trade Association. “Proposals to suddenly cut tariffs combined with the threat of closure of the scheme next January will spark a massive market rush. This is the antithesis of a sensible policy for achieving better public value for money.”

The Treasury sets annual spending caps on clean-energy assistance programs that rise from 4.3 billion pounds ($6.7 billion) this tax year to 7.6 billion pounds in 2020-2021. The government projects actual spending to reach 9.1 billion pounds by 2021, an overrun that only just falls inside the 20 percent “headroom” provided to allow for shifting costs.

Spending Caps

Thursday’s proposals include an annual spending cap on feed-in-tariffs for new projects through March 2019, when the program would end, of 75 million pounds to 100 million pounds. It also sets out new reduced tariff levels for solar panels, small wind turbines and small hydroelectric programs, and proposes a quarterly “degression” system to reduce assistance as costs come down and deployment increases.

“If cost-control measures are not implemented or effective in ensuring that expenditure under the scheme is affordable and sustainable, government proposes that the only alternative would be to end generation tariffs for new applicants as soon as legislatively possible, which we expect to be January 2016,” the department said.

The proposals are subject to a public consultation that ends on Oct. 23.

©2015 Bloomberg News

Lead image: Solar roof Credit: Shutterstock.