Across the UK, from Argyllshire to mid-Wales, residents’ campaign groups – or nimbys, to you and me – are quietly celebrating.
On 22 June Amber Rudd, newly appointed secretary of state for environment and climate change, confirmed plans to scrap the subsidies available for new onshore wind farms.
“Clean energy doesn’t begin and end with onshore wind,” Rudd said. “Onshore wind is an important part of our current and future low-carbon energy mix. But we are reaching the limits of what is affordable, and what the public is prepared to accept.
“Government support is designed to help technologies stand on their own two feet, not to encourage a permanent reliance on subsidy,” she added.
To put that in context, as of April 2015, there were just 490 operational onshore wind farms in the UK, comprising 4,751 turbines in total and generating 9.5GW of power. There are also a further 3,000 turbines generating 5.2GW that have already been granted planning permission. Onshore wind currently accounts for around 5% of the UK’s power pipeline, and costs £800m a year in subsidies. With the extra 3,000 turbines, that figure will approach 10% by 2020.
But those without planning will not be eligible for subsidies. By pulling the subsidies, Rudd has effectively pulled the plug on these projects. As a result, some 250 proposed wind farms are now unlikely to ever be built, totalling in excess of 2,500 turbines.
“The government has clearly committed to significantly reducing, if not ending altogether, future development of onshore wind,” says Henry White, resources and energy associate at Strutt & Parker. The simple fact is that while wind farms are capable of generating huge amounts of energy, they are horrendously expensive to build. “It is unlikely that the development of onshore wind farms will continue once the subsidies cease to be available.”
While the nimbys may be celebrating, others are not.
“The new government is likely to face a series of challenges to these new proposals,” says Claire Petricca-Riding, head of planning and environmental law at Brabners. “At present all we have are press releases that confirm the government’s dislike of onshore wind. This is not a policy document and therefore should not carry any weight in deciding whether a development is consented.”
Others worry the government is perhaps not as committed to renewable energy as it claims. “The Conservatives’ manifesto said that they were keen to develop nuclear power and also promote fracking,” says Mark Newton of Fisher German. “They also stated that large onshore wind farms should be decided by local people. These proposals left many within the renewable energy industry asking if we have a future.”
The DECC’s decision to axe the renewable obligation scheme earlier than expected could also effect schemes already consented. “It could be catastrophic,” says Petricca-Riding. The reason, she states, is that renewable energy providers will have to apply for subsidies through the Contracts for Difference scheme, and the final decision to grant those contracts, or not, rests with ministers. “This is seen by many as a further block to prevent onshore wind. Schemes currently awaiting a decision on planning may well get consent, but will find that the scheme becomes unviable due to this change.”
Many wind companies may discover that their projects, even those with planning consent and grid, are no longer financially viable. “If these onshore wind projects are dropped, landowners will lose out on often much-needed rental income,” says Newton.
However, the reality of the plans are not quite as drastic or draconian as the headlines might suggest. Yes, primary legislation will be tabled to shut the renewables obligation, but only 12 months earlier than it was going to be shut anyway.
There will be grace periods for projects already with approval and access to the grid, and, vitally, land, allowing them to collect subsidies through to 2017. With subsidies likely to end anyway, funding from lenders or investment would have been difficult to raise in the months leading to the cut-off point.
“In reality, all Amber Rudd has done is take three months off the pipeline,” says JLL’s head of renewable energy, Dane Wilkins.
For this government, the future of wind power is offshore. “But the costs of offshore are 50% higher,” says Newton. “This change in policy is likely to cost the public many millions of pounds.” And it certainly doesn’t benefit landowners.
Of course, there are numerous alternatives for landowners wishing to invest in, or reap the rewards of, renewable energies. “Landowners with good sites and cheap grid connections should look to renewable technologies such as solar or anaerobic digestion,” says White.
The government has said that it wants to support these alternatives. “We need to continue investing in less mature technologies so they realise their promise, just as onshore wind has done,” said Rudd.
Solar could represent the best option for landowners. Solar arrays are considerably cheaper to build, are far less likely to arouse the ire of residents, and can be built within weeks, instead of the months to years needed for a wind farm.
The costs to build solar arrays, per megawatt, have dropped considerably and are continuing to fall. Indeed, it is estimated that the costs halve every five years. That is then factored in to how the government decides the tariffs and subsidies paid to suppliers. This year it announced cuts of 28%. In other words, while it is becoming increasingly affordable to build solar, it is also become less profitable.
“Despite this, developers have quickly realised that you can still make sizeable profits,” says Wilkins.
However, the potential for solar development has also been capped (see box). So what is left for the landowner?
One promising option is anaerobic digestion, or AD, seen by many as the great hope for renewable energy. “It is also fantastic for landowners and farmers,” says Wilkins. “It requires a feed stock, so there is a greater land use.”
This has also become more sophisticated, with the development of ‘gas-to-grid’ schemes. “Often the grid connection capacity into the electricity network is full, but there are opportunities to go into the medium- or high-pressure gas main network with a gas-to-grid scheme,” says Newton.
On the flip side of that are a number of political arguments surrounding biodigestion. “The ‘fuel vs food’ debate means that, at present, it is unclear whether this will ever generate the scale of development of solar or wind farms,” says White.
Added to that, there is a similar uncertainty over subsidies. Gas sales from AD are supported by the renewable heat incentive. This may stop at the end of March 2016,” warns Newton, “so again, this opportunity may be short lived.”
The future for onshore renewables looks pretty bleak. The government has said it is committed to low carbon and green power, but it has made far stronger commitments to fracking and nuclear.
With renewable subsidies vital to the viability of many schemes, their culling is not likely to take the wind out of the sails completely.
“The costs of renewables, and particularly solar, will shortly come down to below the costs of conventional fossil fuels like coal,” says Newton. “Even without subsidies, the future of energy must be green.”
But the nimbys have won, as far as onshore wind is concerned. Stripped of subsidies, onshore turbines will be permitted only if they are fully funded and approved of by the local community.
Sometimes tilting at windmills isn’t so futile, after all.
The way the wind was blowing
While some may be shocked or delighted by the announcement, which has certainly garnered a lot of headlines and a fair few column inches, no one involved in renewables should be particularly surprised.
The reforms had been touched on as part of the Queen’s Speech – the government’s legislative timetable for the next parliament – and were included as a pledge in the Conservative party election manifesto.
“They were elected and that was a manifesto pledge,” says JLL’s head of renewable energy, Dane Wilkins. “This is simply delivering on that pledge. It isn’t a surprise. It’s democracy, isn’t it?”
Moreover, plans to scrap the renewable obligation scheme have been on the table since the last Labour government, when they were mooted by then-Treasury minister Ed Miliband. The fact is, as Rudd told the Commons, the renewables obligation simply wasn’t doing anymore what it was created to do – encourage innovation.
The government is committed to ensuring that 30% of the UK’s energy is from renewables by 2020. Of that, a third has to come from onshore wind. “We now have enough onshore wind in the pipeline, including projects that have planning permission, to meet this requirement comfortably,” Rudd told the Commons. “Without action we are very likely to deploy beyond this range. We could end up with more onshore wind projects than we can afford.”
Not so sunny for solar
As any resident of the South West of England will tell you, a wave of large solar arrays has been built in the sunnier, more rural parts of the country. “There has been a huge proliferation, which came to a peak last year,” says Wilkins.
But the reason for that peak is the introduction of a cap on the size of solar park that will be eligible for subsidies – in essence the same reform the government is now levelling at onshore wind.
Subsidies for solar parks generating more than 5MW were slashed. “That, in turn, has had a profound impact on the development of that market in the UK,” says Mark Newton of Fisher German.
However, some of the larger, near-corporate solar developers – the likes of Lightsource, which holds a portfolio valued at £1.6bn – are continuing to build out schemes under the old renewable obligation scheme. And for any solar supplier providing power on a contract for difference, there is no cap. “They are still able to build 30 or 50MW arrays,” says JLL’s head of renewable energy, Dane Wilkins. “But it will take four to five years.”
Larger schemes, however, will no longer have the secretary of state deciding whether or not to grant planning permission. Under the government’s plans, that power will reside with the local authority, and so with the nimbys.
The bad news doesn’t end there. CfD subsidies are divided into two pots, around £600m for investment in solar and onshore wind and £200m for offshore and “new tech” renewables. But that is not going to remain the case.
“It will be pushed more towards new tech,” says Wilkins. “In due course that first pot will be deleted.”
