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Solar and wind sectors brace for subsidy axe, as Rudd insists grid-parity is near

Solar and wind sectors brace for subsidy axe, as Rudd insists grid-parity is near
Speculation is mounting ministers will this week provide further details on their trailed “reset” of renewable energy support policies, with the solar industry fearing particularly steep cuts to a range of subsidies.

In a wide-ranging hearing with the Energy and Climate Change Select Committee this morning, Rudd reiterated one of the priorities for the department was affordability and as such levies on energy bills to support clean energy needed to be kept under control.

She also rejected predictions from the onshore wind and solar industries that they could deliver cost competitiveness with fossil fuel power by the early 2020s, suggesting it could come sooner. She highlighted how solar projects in some parts of the world were already being delivered without recourse to subsidy and revealed that following the government’s announcement it would end subsidies for onshore wind farms three unnamed developers had contacted the department to say they are considering developing projects without subsidy.

Rudd’s comments fuelled speculation across the renewables sector that even sharper subsidy cuts than anticipated could be on the cards. “Solar is indeed reaching parity in some parts of the world, like solar farms in California or large-scale commercial rooftops in Italy,” said Leonie Greene of the Solar Trade Association. “However, parity depends on a wide range of factors including the solar resource, energy prices and investment risk. It certainly doesn’t help that module prices in the UK are artificially higher thanks to the EU-China trade dispute. Generally it takes longer for northern countries to reach parity. Europe is also dominated by the large commercial rooftop market, whereas the UK needs to work to deliver an effective policy framework for this potentially very competitive sub-market.”

She added the industry could deliver grid parity over the coming years, but only if a reasonable level of support is retained now. “We have shown in our Solar Independence Plan that it is very affordable for government to provide a stable policy framework for the remainder of this parliament in order to get solar competitive with fossil fuels,” Greene said.

Wind industry insiders also reiterated fears about the impact of the government’s decision to end subsidies for onshore projects, arguing that even if a handful of the largest developers opted to proceed with projects without subsidy support they would face considerable planning barriers and extremely high levels of financial risk.

They also warned that without new onshore wind farms the government may struggle to meet its legally binding renewables targets for 2020, unless there is a drastic acceleration in the roll out of renewable heat and transport technologies.

In addition to concerns over potential subsidy cuts, the wider renewables sector is facing considerable uncertainty after Rudd refused to be drawn on when the next round of contract for difference (CfD) auctions, which had been scheduled for this autumn, will take place.

DECC’s permanent secretary, Stephen Lovegrove, confirmed that based on current projections there was likely to be an “overshoot” on the government’s £7.6bn Levy Control Framework (LCF) clean energy budget, but he argued the “headroom” limit for the budget would not be breached.

Rudd revealed talks were ongoing with the Treasury about how to resolve the overshoot and insisted she was “acutely aware” of the need to provide developers with visibility over the budget post 2021. But the latest confirmation the budget is looking over-stretched will add further fuel to industry-wide fears there is insufficient funding to deliver much of the next wave of offshore wind, biomass and solar farm projects.

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