[EU News] Britain Plans to Cut Subsidies for Renewable Energy

[lioneatszebra]

Britain Plans to Cut Subsidies for Renewable Energy
from The New York Times

The British government on Wednesday announced plans to curb the costs of subsidies for renewable forms of energy like solar power, arguing that the industry could survive without the support.

Representatives of Britain’s growing solar industry, which has been a surprising success story, expressed dismay, and environmental groups saw the move as a setback for the country’s efforts to reduce the carbon dioxide emissions associated with climate change.

The government also said that it was acting to decrease the costs for consumers, who pay for the renewables through taxes in their energy bills.

“We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way,” Amber Rudd, the energy and climate change minister, said in a statement.

Until recently, Britain had been one of the most enthusiastic supporters of renewable energy. Encouraged by a subsidy program, the percentage of electricity generated from renewable sources like solar power and wind has roughly doubled in Britain to about 22 percent over the last three years.

Britain is joining other countries like Spain and Germany that have already reduced incentives for at least some renewable energy sources. In addition, sharp falls in the prices of oil and natural gas over the last year have undermined the competitiveness of green energy. When programs like Britain’s were created, it was widely assumed that oil and gas prices would continue to rise, making the projected high costs of renewable power seem more affordable.

From the viewpoint of the government of Prime Minister David Cameron, whose Conservative Party won a parliamentary majority in May elections, the renewables program has attracted too much investment. A complication of the program is that the more electricity the green sources generate, the more subsidies they command.

Although electricity costs have leveled off recently, household electricity bills have risen about 60 percent over the last decade. Green measures add about 15 percent to those bills, according to analysts’ estimates.

The government says that its projections show the cost of subsidies exceeding the target of 7.6 billion pounds, or about $11.8 billion, it has set for 2020, by about £1.5 billion.

A big portion of the increase comes from wind power, but despite its reputation for clouds and drizzle, Britain has also seen a boom in solar energy. The country was among the first in the European Union to set up sun-catching panels across many farms and rooftops in the last two years as investors and homeowners rushed to take advantage of the combination of subsidies and falling equipment costs. Electricity from solar energy increased 60 percent in the past year, though it remains a small portion of the overall power supply.

The government said it was proposing to cut subsidies on smaller solar projects of up to 5 megawatts, which usually equate to plots of about 25 acres. The government has already said that larger solar projects, as well as onshore wind facilities, would no longer be eligible for big subsidies. Some of the Conservative Party’s supporters in rural areas consider solar and wind farms to be a blight on the landscape. Projects that are already underway will probably keep their subsidies. The plans need parliamentary approval, which is expected under the Tory majority, and would take effect in April.

“This is very disappointing for the solar industry,” said Leonie Greene, a spokeswoman for the Solar Trade Association, an industry group.

Ms. Greene said that with costs of installations falling fast, solar farms were close to being competitive with new power plants fired by natural gas. But she said that a couple more years of government support was warranted to give the developers time to close the gap further.

Juliet Davenport, chief executive of Good Energy, a renewable energy business that owns six solar farms in Britain, said: “From our point of view, any change of policy means investors are concerned about investing.”

“It makes business strategy very difficult,” she added.

Deepa Venkateswaran, an analyst at Bernstein Research in London, said that electric power generation was the best bet for further reductions in carbon dioxide emissions, rather than other industrial sectors like transport. She said the government might be sacrificing big climate change gains for budgetary savings that amount to “small change.”

“Investors in the power sector are ready to make the investments in renewables,” she said. “If the government takes away the incentives or gives low clarity, clearly those investments won’t happen.”