Energy Policy in the UK


There is a great deal in the press and social media about changes in UK renewable and low carbon energy policy. It is very hard to keep up with current policy; therefore, we have written this blog to explain what is happening, and what avenues there are for the renewable and low carbon industry to support itself. This is not a political blog, and only seeks to provide information.

1 WHAT IS HAPPENING?

1.1    Climate Change Levy

This policy was a simple carbon tax paid by businesses who were in either the industrial, commercial, agricultural or public services sector. A business would not pay the tax on any energy from certified renewable energy sources. The idea of this was to encourage businesses to use renewable energy.

In the Budget 2015 it was announced that renewable energy would also be charged this carbon tax, and will be taxed for the greenhouse gases they have not emitted.

1.2    Onshore wind planning

Major changes have been made to planning laws within England which effectively make it impossible for Local Authorities to approve any onshore wind projects unless they lie within areas allocated for such development in Development Plans. A very small number of Local Authorities currently have such allocations and it is likely to take several years for the planning system to ‘catch up’. In addition, the right to appeal projects refused locally to the national Planning Inspectorate has been removed – this policy just applies to onshore wind proposals.

1.3    Onshore Wind

The subsidy available for onshore wind farms in the UK was scheduled to be phased out in 2016, and allowed developers to plan ahead accordingly (the average site taking five years to develop). However this has been removed completely with no notice, impacting the economics of most projects and companies facing huge financial losses for development costs, as well as denting investor confidence.

1.4    Photovoltaics (Solar PV)

A number of changes are to be implemented on photovoltaics. The Renewables Obligation, which currently supports larger rooftop and solar farm projects between 50kWp and 5MWp in size, is to be closed from 1 April 2016, as well as a planned reduction in levels of support for projects currently in the pipeline.  Critically, DECC is also proposing to end ‘grandfathering’ within the scheme from now on, the guarantee that a certain level of subsidy will be provided throughout the lifetime of a solar project once built.

With regards to the Feed-in Tariff, which supports small-scale rooftop and solar farms, the government has removed ‘pre-accreditation’ to a fixed tariff level, meaning that complex community and commercial projects that can take longer to complete could have to deal with reducing tariff levels between the start and finish of the project [[1]]. It is important to note however that these changes do not affect domestic solar.

The government has halted the Feed in Tariff from January 14th to February 8th 2016. From February 2016 the Feed in Tariff will be reduced to 4.39p/kWh for domestic systems, 4.39p/kWh for 10-50kWp installation, decreasing to 0.87p/kWp for >5MW installations. This represents a 65% cut for domestic installations. There will be three monthly decreases (degressions) in the tariffs available for new entrants to the scheme, so it is better to install now rather than later. The largest issue is the “cap” system, which limits the number of PV new PV installations which can receive the Feed in Tariff from February 2016 to the first quarter of 2019. The limit is approximately 60% of the installations in 2014, thus is can reasonably assumed that the Feed in Tariff will be closed by the end of 2016 for PV.

1.5    Zero Carbon Homes

The polices for Zero Carbon Homes were announced in 2006. All new domestic buildings would be zero carbon if they were built in 2016 or after. The same applied to commercial buildings from 2019 onwards. With the deadline less than six months away, and after massive investment by many companies to prepare for this target, it was scrapped in June 2015.

1.6    Green Deal

The Green Deal was a policy to help insulate homes through a loan scheme paid back in bills. A further part of this was the Green Deal Home Improvement Scheme. The government removed financial support for these in July 2015, with no replacement policy suggested. [[2]]

1.7    Green Investment Bank

The Green Investment Bank was created to lend money to renewable energy projects at a reasonable interest rate. The money for the organisation was gathered from dormant bank accounts, those of people who had either died, or long forgotten about their bank account. The government is now seeking to sell the Green Investment Bank.

1.8    Renewable Heat Incentive

The renewable heat incentive was created to support heating technologies, such as solar thermal, heat pumps and biomass. It has been announced this will be reformed to reduce the cost by £700m.[3]

1.9    Delay of Contracts for Difference

The Department of Energy and Climate Change has postponed the next Contracts for Difference auction for renewable energy projects. Contracts for Difference are a complex new scheme to support energy projects (not just renewable), however, currently there is no date given as to when the renewable energy Contracts for Difference auction will happen.[[4]] There will be further announcements in the autumn.

1.10   Cuts to the Department of Energy and Climate Change of 90%

Recent research by the politically-neutral environmental thinktank the Green Alliance has shown that the Department of Energy and Climate Change is facing a 90% cuts in staff budget over the next three years. The net result of this will be loss of almost all expertise and capability within the department.[[5]]

1.11   Energy Company Obligation

The government have announced that after the current round of Energy Company Obligation (the main source of funded insulation in the UK) there will be a one year pause. Many in the insulation industry warn that this could lead to the industry’s collapse.[[6]]

1.12   VAT on Solar

Photovoltaics and solar thermal will be charged 20% VAT from the 1 August 2016, up from 5%.

2 WILL THESE CHANGES SAVE CONSUMERS MONEY?

According to the UK Government’s Department of Energy and Climate Change’s figures, the savings from removing financial support for the photovoltaic industry in the ways suggested in the Energy Bill will be 50 pence a year.[[7]] The wind changes will achieve a similar saving.

Furthermore, the UK spends £26 billion [[8]] a year on subsiding fossil fuels, compared with the 3.5 billion [9]on renewable energy.

3 WHAT ARE THE IMPACTS?

3.1    Scrapped renewable energy projects

So far, 270MW of wind farm projects have been scrapped because of the changes.[[10]] It is expected that 2,500 turbines will be ultimately cancelled , with a total energy output of that of one large coal fired or nuclear power station.[[11]] Similar issues are hitting the photovoltaic industry. Ultimately it can be expected in 2016 the UK photovoltaic industry is unlikely to survive, and the wind industry will be significantly reduced. No technology should receive subsidy for a moment longer than is necessary, but removing it prematurely undermines investor confidence in UK infrastructure projects.

3.2    Foreign investment

With regard to internal investment in the UK, we know of one major company and at least four European wind developers who have decided to cease or significantly reduce plans to develop in the UK (fortunately for us, not clients of ours). Another firm we were in talks with from mainland Europe have decided to avoid the UK. According to the news website edie.net, industry insiders suggest the recent reduction in the offshore wind farm plans for Dogger Bank were in part due to uncertainty over UK energy policy.[[12]]

3.3    Jobs

The renewables industry supports 112,026 jobs within the UK, and the energy efficiency industry provides several thousand more.[[13]] The photovoltaic industry employs 38,200 people whilst the wind industry directly employs 19,000 (30,000 if we include associated jobs [[14]]). A significant level of redundancies due to these changes have already begun, with the closure of both Southern Solar and Climate Energy, many redundancies at Mark Group and numerous small companies. The Solar Trade Association estimated in December 2015 that the current job loses caused by government policy were 1800, with 1600 extra on notice of redundancy, and many more to follow. [[15]]

3.4    Increasing energy bills

As shown in the past, the increases in energy bills in the UK are driven by the wholesale price of fuel, not renewable energy technologies. To reiterate research by the Government’s Committee on Climate Change, not implementing renewable energy policies will add £600 to household energy bills by 2050.[[16]]

3.5    Fuel poverty

By removing the zero carbon homes policy, there is no longer an incentive to make future highly efficient buildings, meaning that fuel poverty will continue to be a problem in the UK. Over the past 12 months the fuel poverty gap in the UK (the level of how deep into fuel poverty people are) is estimated to have increased by 3%. [[17]] Zero Carbon homes were meant to help stop this trend. Additionally, the one year pause in ECO will mean mass insulation of fuel poor homes will stop in the UK for at least a year.

3.6    Energy security

Renewable energy is a major part of the UK’s energy mix. There are now so many solar photovoltaic panels across the UK that they have the same output over a year as a coal fired power station[*]. Additionally, renewables are supporting the UK grid, for example in October 2015, wind power kept the grid running at a time when eight nuclear reactors were down and the Didcot B gas power station was offline.[[18]]  It is not possible to build fossil fuel or nuclear power stations as fast as we can build renewables. Halting the UK’s renewable energy development will leave the UK more reliant on imported energy.

3.7    International agreements

The UK will fail on its agreements on renewable energy and climate change due to these policy changes. Within the European Union there is a target of 20% of all energy from renewables by 2020. The UK was given a lower target of 15%. However, with the new energy policy changes, the UK may not be able to hit this target.

3.8    Climate Change and the Paris Climate Change talks

These changes will obviously affect the UK’s ability to hit its climate targets, both the UK’s own targets and those mandated by the Paris agreement in order to prevent a global 2°C rise in temperatures and thus dangerous climate change. According to the Climate Change Committee, new energy policies are required to reduce the UK’s greenhouse gas emissions. [[19]]

4 ARE RENEWABLES DEAD IN THE UK?

No, but as an industry we must be more cautious of government policies and incentives which can change at any moment.

5 WHAT CAN WE DO?

Here are some things you can do:

5.1    Petitions

There is a petition on the Government website for a review of these changes, if it hits 100,000 people it will force a debate in parliament.

https://petition.parliament.uk/petitions/106791

There are two petitions on 38 Degrees as well, please sign them.

https://you.38degrees.org.uk/petitions/overturn-the-removal-of-onshore-wind-subsidies

https://you.38degrees.org.uk/petitions/stop-the-uk-government-killing-off-the-uk-solar-industry

5.2    Talk to your MP

All the MPs in parliament need to understand the threats the current energy policy changes pose to jobs, fuel poverty and energy security. Please do write to and/or meet with your MP (find them throughtheyworkforyou.com) and use the materials in this blog. Or if you don’t have much time then use twitter to tweet to your MP.

5.3    Respond to consultations

The government is putting out a number of consultations on these changes. Friends of the Earth are currently challenging the government on the very fast timescales of these consultations. We will keep this updated as they come out.

5.4    Support lobby bodies

The Solar Trade Association and Renewables UK are both fighting these changes, if you are in a company that is a member of these organisations, please get as involved as you have time for.

5.5    Spread the word

The changes to energy policy are harmful to the UK, and are being driven under the banner of reducing bills. This does not fit with the financial data from government, please spread accurate information to the media and general public. Writing to your local paper (or national papers), using blogs, talking to people you know about all of this, it all helps.

Many thanks to Dan Grierson from The Energy Workshop, Sonia Dunlop from the Solar Trade Association and Alison Hood from Fact Check the Energy Bill for additional information

 

[*] According to DECC, there was 7,750 MW of solar at the end of June 2015. A reasonable approximation based on this would suggest this would produce 6.6TWh a year. If we assumed a coal power station running 8760 hours a year, then this is the equivalent of a 751MW station, such as Keadby Power Station

[1] Solar Trade Asssociation, “Investor confidence to take blow with proposal to end guaranteed level of support through lifetime of large-scale projects,” 22 07 2015. [Online]. Available: http://www.solar-trade.org.uk/big-commercial-solar-roofs-and-farms-face-major-cut-in-support/.

[2] The Carbon Brief, “Explainer: Amber Rudd ends Green Deal energy efficiency scheme,” 24 07 2015. [Online]. Available: http://www.carbonbrief.org/blog/2015/07/explainer-amber-rudd-ends-green-deal-energy-efficiency-scheme/.

[3] Energy efficiency scheme cut as Osborne announces next phase of green policy shake-up, Business Green, 2015 (http://www.businessgreen.com/bg/news/2436536/energy-efficiency-scheme-axed-as-osborne-announces-next-phase-of-green-policy-shake-up)

[4] edie.net, “DECC postpones next Contracts for Difference auction,” 22 07 2015. [Online]. Available:http://www.edie.net/news/6/Contracts-for-Difference-CfD-2015-auction-postponed-by-DECC/.

[5] Green Alliance, “What new spending reductions could mean for DECC,” 2015. [Online]. Available:http://www.green-alliance.org.uk/resources/What%20new%20spending%20reductions%20could%20mean%20for%20DECC.pdf.

[6] Green building firms facing ‘depressing’ wait for new energy efficiency plan, Business Green, 2016 (http://www.businessgreen.com/bg/analysis/2442570/green-building-firms-facing-depressing-wait-for-new-energy-efficiency-plan)

[7] The Guardian, “Solar power subsidies cut might save just 50p on average electricity bill,” 22 July 2015. [Online]. Available: http://www.theguardian.com/environment/2015/jul/22/solar-power-subsidies-to-be-cut-under-plans-to-reduce-green-energy-costs.

[8] International Monetary Fund, “See spreadsheet in Country Database “By Product 2015” for UK statistics,” [Online]. Available: http://www.imf.org/external/pubs/ft/survey/so/2015/new070215a.htm.

[9] HM Government, “Cost of renewables: DECC states that this is £3.5bn in 2014/15,” [Online]. Available:https://www.gov.uk/government/news/controlling-the-cost-of-renewable-energy.

[10] A. Hood, “Fact Check the Energy Bill,” 17 08 2015. [Online]. Available: http://www.crowdfunder.co.uk/fact-check-the-energy-bill.

[11] BBC, “Onshore wind farms cancelled as subsidies cut,” 22 07 2015. [Online]. Available:http://www.narecde.co.uk/does-renewable-energy-cause-fuel-poverty/#.VdMsLbTEL7M.

[12] edie.net, “Dogger Bank: Plans for 2.4GW of offshore wind capacity scrapped,” 07 08 2015. [Online]. Available:http://www.edie.net/news/6/Dogger-Bank–Plans-for-2-4GW-of-offshore-wind-capacity-scrapped/.

[13] [Online]. Available: http://www.r-e-a.net/news/uk-renewable-energy-jobs-grow-over-7-times-faster-than-national-average-employment-growth.

[14] 38 Degrees, “Save onshore wind,” 2015. [Online]. Available: https://you.38degrees.org.uk/petitions/overturn-the-removal-of-onshore-wind-subsidies.

[15] STA Briefing: STA and RUK Jobs Survey Nov 15 [online], 2015 (http://www.solar-trade.org.uk/wp-content/uploads/2015/11/Jobs-survey-final.pdf)

[16] Narec Distributed Energy, “Does renewable energy cause fuel poverty?” 12 03 2013. [Online]. Available:http://www.narecde.co.uk/does-renewable-energy-cause-fuel-poverty/#.VdMsLbTEL7M.

[17]HM Government, “Annual Fuel Poverty Statistics Report 2015,” Department of Energy and Climate Change, 2015.

[18] Ecotricity, “Why Nothing Happened,” 07 11 2014. [Online]. Available: https://www.ecotricity.co.uk/news/news-archive/2014/why-nothing-happened.

[19] The Fifth Carbon Budget The next step towards a low-carbon economy, Committee on Climate Change November 2015 (https://d2kjx2p8nxa8ft.cloudfront.net/wp-content/uploads/2015/11/Committee-on-Climate-Change-Fifth-Carbon-Budget-Report.pdf)

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