UK delays green power subsidy decision for second time

Reuters News
Posted: Jul 17, 2012 10:07 AM
UK delays green power subsidy decision for second time

By Karolin Schaps

LONDON (Reuters) - The British government on Tuesday put off for a second time a crucial announcement on subsidy levels for renewable energy, risking further delays in projects that will help Britain meet its legally binding climate change targets.

The government was due to announce by Tuesday new state support levels for renewable energy projects from April 2013, before Parliament breaks for summer recess.

"We will not be making an announcement today. We will bring forward the proposals in due course as we are discussing and finalizing the details," a spokesman for the Department of Energy and Climate Change said.

Proposed new subsidy levels were first announced in October and were due to be finalized in the spring, but a first delay moved the deadline to before the summer recess.

Britain needs heavy investment in renewable energy to meet its target to generate 15 percent of its energy consumption from renewable sources by 2020, compared with around 9 percent last year.

The government failed to announce a new decision date, but said it must set 2013 subsidy levels by September 30.

"We have had difficulties in finalizing (the subsidy levels). We will make an announcement as soon as possible. I understand the importance of getting a decision out there," Energy and Climate Change Secretary Edward Davey said in a parliamentary committee meeting on Tuesday.

Through the so-called Renewable Obligation Certificates (ROC) scheme, the government has been financially supporting the development of installations including solar panels, wind turbines and biomass turbines larger than 50 kilowatts.

Tuesday's delay means that investors in such renewable energy projects are unsure about how much state support they can count on from April next year.

"Investor confidence is seriously wounded, and a variety of transactions will be significantly delayed," said Ben Stansfield, senior associate at law firm Clifford Chance who advises renewable energy investors.

British power producer Drax, for example, has devised plans to increase green power production from biomass in its mainly coal-based electricity generation portfolio, but it said repeatedly it was waiting on subsidy clarity before deciding whether to invest.

"We would not wish to see investment and job creation harmed in one of our key growth sectors, and we need to ensure that confidence is not damaged. The industry urgently needs clarity at the earliest possible opportunity," Maf Smith, deputy chief executive of green energy association RenewableUK, said.

(editing by Jane Baird)