UK renewables industry takes stock of spending review

After a tense few weeks amid headlines of doom and gloom for renewable energy development in Britain, the Comprehensive Spending Review (CSR) announcements made to date leave room for optimism.

Many media commentators had speculated that the CSR would be bad for renewables and the industry has been lobbying hard. The new, hard fought for feed-in tariff (FiT) has been especially worrysome, with rumours of an immediate 10% cut adding to the woes of the early adopters of solar panels (who were told the benefit was to be backdated, only for Prime Minister David Cameron to confirm this had been reversed).

But it wasn't only unchanged FiTs that were on the shopping list of the industry. There were question marks over the setting up of a green investment bank, the Renewable Heat Incentive (RHI), as well as further support for infrastructure necessary for offshore wind development.

So after the headlines of Chancellor George Osborne's speech, what do we now know?

Feed-in Tariff

This will remain untouched. For the moment, and this at least brought a huge collective sigh of relief from the micro-generation/PV sector. Solar PV tariff levels will remain at current levels over 2011, and then in 2012 will be reduced, as planned, by 9%. The review, already scheduled to take place in 2013, will set out Tariff rates for 2013 and beyond. At that review there will be a refocusing on the most cost-effective technologies, to achieve a saving of £40 million in 2014 – 15.

Renewable Heat Incentive

To the relief of the renewables industry this subsidy for green home heating goes ahead in 2011-12 with public cash backing, but 20% smaller than the last government envisaged. It gets £860 million of funding in anticipation of a 10-fold growth rate in the sector.

The green investment bank

This will get £1bn of public cash as a "backstop", Osborne said, while asset sales in the future will add "significant" proceeds, with the aim of then leveraging private capital to invest in low-carbon projects.

This is less than the £2bn hoped for and much less than the £6bn many people said was needed for a serious attempt to kick start a low carbon economy. And it is still unclear whether the bank will be a real bank or a government fund.

Further investment for "low-carbon technologies"

Chancellor Osborne said there will be £200m including for offshore wind and the port development needed to be able to handle big turbines which will be needed for Round 3 projects.

Reaction from the main industry associations.



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