RenewableUK, the trade and professional body for the wind and marine energy industries, has welcomed the publication of a report by the Energy & Climate Change Select Committee following its pre-legislative scrutiny of the forthcoming Energy Bill.
The report by the ECCC highlights a number of concerns which a range of commentators, including RenewableUK, had brought to the attention of the Committee. These include:
Over-complexity in the design of the Government’s new support mechanism for low-carbon energy, ‘Feed-in Tariffs with Contracts for Difference (FiT CfDs)’. The Government is proposing that instead of these contracts being guaranteed by the Government, they will instead by held by a range of organisations arranged into a complex legal construction described as a ‘synthetic counterparty’. This has been described by the Committee as legally unenforceable and potentially not creditworthy.
The process outlined to ration CfDs in line with Treasury limits on amounts taken from bills to support low-carbon energy. This makes it difficult for companies to know whether they will be able to get a CfD for their project by the time they make a decision to invest, increasing the risk of investing in low-carbon energy, and thus the cost of doing so.
Independent generators do not have a clear route to market for their electricity under the proposals, as the current obligations for suppliers to buy from renewable sources have been removed.
RenewableUK’s Director of Policy, Dr Gordon Edge, said:
“Decarbonising our electricity system is one of the biggest challenges facing this Government, and it’s vital that we get it right. The Government needs to step up to the plate and ensure in key areas such as underwriting the new contracts they listen to what the Committee has urged. If the Government gets the reform wrong, we will see less diversity in the market, higher prices for consumers, over reliance on imported dirty fuels, and the potential of tens of thousands of low carbon jobs lost. As the Committee states, the Government only has a limited amount of time to get this into working order. There’s a lack of clarity now on both the short and medium term, and that’s bad news for investment.
“Major investment decisions, with all the implications for jobs and economic growth they entail, will be made soon. If the UK is to benefit, the policy framework needs to be right – and quickly. We call on the Government to both publish its decision on the Renewables Obligation, at the rates consulted on, to provide surety to industry that energy policy is based on evidence and redouble its efforts to ensure that what comes out of the Energy Bill will secure sufficient investment in low-carbon energy to enable us to reap the economic rewards of this world-wide energy revolution.”
[mappress]
Offshore WIND staff, July 23, 2012