George Osbourne recently announced the Government’s decision to cancel renewable electricity sources exemption from the Climate Change Levy – a move that is estimated to cost green energy producers around £450m in the current financial year, according to trade association RenewableUK.
In June the government also announced its intention to end new public subsidies for onshore wind farms by legislating to close the Renewables Obligation across Great Britain to new onshore wind generating stations from 01 April 2016. Yet onshore wind is our most cost-effective and developed low carbon electricity resource.
Caroline Flint, the shadow energy secretary, openly stated renewable energy investment was undermined by the mixed messages of Cameron’s last government and that looks set to continue.
The Treasury’s Productivity Plan published on 10 July also confirmed that the government does not intend to proceed with the zero carbon Allowable Solutions carbon offsetting scheme (a requirement on builders to offset new-build carbon emissions by making a contribution to carbon reduction elsewhere), or the proposed 2016 increase in on-site energy efficiency standards.
As pointed out by Melanie Leech, Chief Executive of the British Property Federation: “The abandonment of the allowable solutions mechanism is short sighted with respect to both the Government’s long-term carbon budgets and the European Union’s obligations for nearly-zero energy buildings from 2020.”
In addition to this, it was revealed during the budget announcement that the UK’s Department of Energy and Climate Change (DECC) faces cuts of 90% to its staff budgets within three years threatening the government’s ability to deliver on climate policy and move the energy supply to cleaner sources.
The effect of all of these decisions will undoubtedly be higher energy bills for consumers particularly if the government does not protect its in-house expertise to negotiate contracts with the energy industry, to complete market reform and to develop new energy saving programmes.
All of these changes of late create uncertainty, which could potentially deter vital investment in the renewables and built environments and threaten economic growth.
The fund manager Neil Woodford, who has Drax amongst his holdings, recently sent an open letter to government stating its decision to make renewable firms pay the levy will create mistrust amongst investors as it can no longer be trusted to fulfil its long term commitments and consistency is essential way beyond the length of a political cycle.
The lack of policy consistency was also highlighted during an Energy Legislation Forum hosted by energy consultants, Carbon2018 Limited. The group concluded that energy regulations were disjointed with too many separate requirements monitoring and managing the delivery from different perspectives. A better approach would be one cohesive set of regulations with one Government department responsible for their implementation.
As commented by Melanie Kendall-Reid, Compliance Director, Carbon2018 Limited: “This is ludicrous and goes against the government’s vision to create a sustainable energy system. These changes are not a good outcome for the UK economy nor the UK’s chances of reaching its legally binding target to reduce greenhouse gas emissions by at least 80% below 1990 levels by 2050. ”