Energy companies have warned that 15 “illogical” policy changes introduced by the new Conservative government since May have made some renewable power sector projects “uninvestable” — causing them to cancel billions of pounds worth of investment.
RWE Innogy — the renewable energy unit of Germany’s RWE Group — has scrapped nine onshore wind projects in England in the past four months, halting investments of more than £250m. Although onshore wind is a core growth area for the business, it has instead switched money earmarked for the UK to projects in the Netherlands and Germany.
Mike Parker, head of onshore wind at RWE Innogy UK, says: “Investors are worried now about investing in the whole UK energy market, it’s not even just in the renewables space.”
In addition to the nine cancelled projects, RWE Innogy has also put its other UK projects on hold for the foreseeable future. “People will spend their money in places where there is a stable investment”, says Mr Parker, adding that those places no longer include Britain.
His concerns are not unique. Several large energy groups, including EDF and Vattenfall, have announced similar cancellations, and this week a top UN environment scientist became the most prominent expert to criticise government cuts to renewable energy subsidies.
Jacqueline McGlade, chief scientist of the UN’s environment programme, told the BBC: “What’s disappointing is when we see countries such as the United Kingdom that have really been in the lead in terms of getting their renewable energy up and going — we see subsidies being withdrawn and the fossil fuel industry being enhanced.”
Industry body RenewableUK estimates that more than a gigawatt of energy capacity — enough to power 1m homes — could be lost from the UK onshore wind sector.
According to the Renewable Energy Association, the Conservative government has introduced 15 policy changes that have damaged the industry since winning the election in May.
Ben Warren, head of energy and environmental finance at professional services EY, says: “Policy is being set in a vacuum, instead of on the basis of logic and sound evidence. In the absence of any context it undermines investment across the sector and beyond.”
Most notably, the government has withdrawn subsidies for solar and onshore wind energy, and forced renewable energy producers to pay a climate change tax. At the Conservative party conference last week, Amber Rudd — the first Conservative energy secretary in 20 years — reiterated her commitment to being “tough on subsidies” for the green sector.
Cutting subsidies is explicitly intended to halt the spread of onshore wind developments, which the government argues are unable to provide stable capacity and often fail to win public support. But difficulties for wind operators are not providing opportunities for other renewable technologies. Research firm Solar Intelligence estimates that several hundred megawatts worth of solar farm projects have been cancelled since May. On Wednesday, installer Southern Solar became the fourth company of its kind to close since the start of October when it entered administration.
A spokesman for the Solar Trade Association said the removal of subsidy guarantees “destroyed the bankability of the whole industry overnight”, and US investment group SunEdison recently announced it would leave the British market because of the “draconian” cuts.
In the latest EY quarterly Renewable Energy Attractiveness Index, which ranks 40 countries as a destination for green investment, the UK has fallen out of the top 10 for the first time in 13 years. It now sits behind countries including China, Chile and Brazil.
EY claims the government has “sentenced the UK renewables sector to death from a thousand cuts”.
Mr Warren, who is chief editor of the Index, says conciliatory moves, such as extending a grace period for projects to claim subsidies, would do little to help. He suggests government policy “points to abject confusion — it’s a sticky plaster to cover a big crack in energy policy, and it will give no real comfort to the sector”.
Contrasting the renewable subsidy cuts with the government’s “unrelenting” support for fracking and new nuclear power, Mr Warren says: “This government has shown it’s very ready to support mega-projects, but it can seem like it’s interested in legacy projects for legacy’s sake.”
A spokesman for the Department of Energy and Climate Change said: “Government support has driven down the cost of renewable energy significantly, which has helped the sector to stand on its own feet and successfully compete with other technologies. Our priority is now to move towards a low-carbon economy whilst ensuring hardworking families and businesses have secure, affordable energy for generations.”
However, Gordon MacDougall, managing director for western Europe at UK renewable energy group RES, notes that his company has had to halt progress on a number of projects in the early planning stages. He suggests any hiatus in new onshore wind will be “bad news for energy consumers, as well as detrimental to the UK’s energy security and decarbonisation needs”.
These needs will be back on the agenda in November, when the UN tries to reach a global agreement on fighting climate change. But the renewable energy companies operating in the UK say another November event will be far more influential: the government’s comprehensive spending review. Mr Parker calls it “the single most important factor for the way the government will be allowed to operate in future”.
This article has been amended since initial publication to clarify that RenewableUK’s estimated loss refers to total capacity.
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