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UK's DECC - greater uncertainty for UK Offshore Wind

By: Chris Anderson 21/07/2015 Chris Anderson

General Grid Windfarms

The Energy and Climate Change Committee questioned Rt Hon Amber Rudd MP, Secretary of State, Department of Energy and Climate Change as part of the Committee’s inquiry into the Department of Energy and Climate Change's (DECC) priorities for 2015.

Defending her stance on Onshore Wind she stated "We had a commitment with the Levy Control Framework by that that would not go higher than £7.6 billion between 2020 and 2021.. it became apparent that those costs were rising to £9.1 billion by 2020-2021 so one of the things I had to do was to reduce subsidies."

Stephen Lovegrove, Permanent Secretary, Department of Energy and Climate Change stated "Technology moves much more quickly than we had any real conception of which is one of the reasons why the LCF has gone to £9.1 billion. Who knows how quickly Offshore Wind prices are going to come down. They have come down very very very fast for instance from north of £150 pounds per megawatt hour to £120 pounds per megawatt hour."

Amber Rudd MP went on to "We will be making announcements shortly in order to clear up to industry on what will be made available and what will not. I am conscious that we need to give more certainty on this but is taking time..
We have a very successful deployment of Offshore wind. Both (solar and offshore wind) will continue to play an important part in the low carbon combination"

When asked about the next round of Contract for Difference (CfD) auctions she went on to say "I will be making announcements over CfD's but that wont be for a little while."
When pressed "so there will be a further round?" she replied "I cant confirm that at the moment" raising alarms and increasing uncertainty to an offshore wind industry that has already suffered due to previous government policy changes, increased politicisation of electricity, currency fluctuations and recession.

Defending Stephen Lovegrove, Permanent Secretary "We have got good tools in place to do what the government wants to do. The caps for the Levy Control framework for 2020 has been set.. we are going to overshoot the £7.6 billion cap by 2020."

Regarding questions on what would happen post 2020 Amber Rudd added that "I am acutely aware of the need to give some certainty after 2021 ... but I am in discussions to see what can be said and how soon over a future Levy Control Framework after 2021."

When pressed on questions over the £92.50 per megawatt hour subsidy for the Nuclear Hinckley Point C for 35 years, deemed by some of the committee as a contradiction of policy when arguing the need to remove lower subsidies for Onshore wind, Amber Rudd went on to argue that this is a cheap insurance policy for "Security of Supply". Stephen Lovegrove argued that other lower energy sources such as Gas were temporary and that the "costs of production in the gas markets are still expected to rise over the period of time we are talking about" and that the likelihood of a functioning carbon market will raise costs further for gas, implying that the £93.50 per megawatt hour may not need to be subsidised for the full 35 years.

Of course this remains to be seen, but then if we apply the same logic to other subsidised energy sources .... ?

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UK's DECC - greater uncertainty for UK Offshore Wind

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