Comment on changes to renewable energy support

Professor Grubb was commenting on new proposals announced today on cutting support for renewable energy. He said: “The entire energy industry is now concerned about the risk of a capricious and politicised UK energy policy, driven more by Treasury intervention than by the Department responsible.”

He said: “The falling costs of both renewables and gas create the ideal opportunity to build a modern energy system that combines both at scale without driving up overall energy bills from present levels. The major risk for the energy sector is uncertainty and instability sharply driving up the cost of doing business in UK energy. Stability cannot be delivered by ignoring the realities of climate change, the global Paris negotiations, or existing legal commitments on renewables and the UK carbon budgets.

Professor Grubb said that the renewables industry is “being penalised for success”. He said that the installed solar energy capacity has grown to five times the level projected, at half the cost per unit, and wind turbines have been producing more than expected; both increase the volume of renewable energy receiving subsidies. At the same time, the Treasury’s earlier decision to freeze the carbon floor price, the subsidies to conventional power through the capacity mechanism, and the falling gas price have all combined to increase the bridge that the renewable subsidies have to span.

He said: “This is a pivotal moment in UK energy policy, on which it is beginning to look like the UK has two Governments. One is that pressing for strong international action on climate change, which signed an unambiguous cross-party pledge to phase out unabated coal, reiterated its carbon targets and which committed in its manifesto to deliver clean renewable energy as cost-effectively as possible. The other is a Government which has moved to prematurely end supports for the cheapest of the UK’s main renewable resources, which has injected fear and uncertainty into renewable energy investors – and which seems set to also scrap energy efficiency programmes which have helped to cut consumer bills and avoided the need for billions of pounds of new fossil fuel investments.

“Sooner rather than later David Cameron must clarify which Government he is really leading.”

Former Shell Chairman Lord Oxburgh of Liverpool agreed that constant changes to policy increased costs. He said: “The changes that the Government is announcing in the name of affordability will have the perverse effect of increasing the cost of clean energy. Constant changes to energy policy undermine investor confidence and increase the cost of capital for renewable energy projects.

“At a time when North Sea oil and gas is in terminal decline, we should remember that it took consistent Government support to get that industry off the ground. If we’re serious about building a new, clean energy industry in the UK, including our unique offshore wind resource in the North Sea, that also needs stable, long-term support from Government.”