A number of leading renewable energy organisations are warning that government proposals in the consultation launched yesterday to review the Feed-in Tariffs scheme will jeopardise investment in the renewable energy sector and put thousands of jobs at risk.

The consultation launched by the Department of Energy and Climate Change (DECC) is proposing a set of measures to control costs under the Feed-in Tariff, including revised tariffs based on updated technology cost data and deployment caps leading to the phased closure of the scheme in 2018-19. It proposes that if such measures cannot put the scheme on an affordable and sustainable then there should be an end to generation tariffs for new applicants as soon as legislatively possible, which we would expect to be January 2016. It also proposes other measures to ensure the scheme is more closely aligned with other DECC policy measures.

While acknowledging that “FITs has exceeded all renewable energy deployment expectations”, with  updated evidence suggesting that “there have been significant reductions in technology deployment costs, beyond 50% in certain tariff bands”, the Government says that the deployment success has also come with costs exceeding projections.

It now expects to breach the limits of the Levy Control Framework (LCF), the amount of money agreed within Government which can be added to consumer bills to pay for low-carbon electricity generation, and deploy more small-scale renewables than envisioned when the scheme started.

The consultation paper says:

“We are therefore proposing measures to place policy costs on bills on a sustainable footing, improve bill payer value for money, and limit the effects on consumers who ultimately pay for renewable energy subsidies.”

The consultation is now seeking responses to two sets of questions about the impact of major proposed changes to the scheme. The first, around value for money, proposes new generation tariffs based on fresh evidence about costs, technology characteristics, and rates of return new FIT participants might get.

The second, around cost control, proposes a cap on new FITs expenditure of between £75-100m by 2018/19. If cost control measures are not implemented or effective in ensuring that expenditure under the scheme is affordable and sustainable, the Government is proposing that the only alternative would be to end generation tariffs for new applicants as soon as legislatively possible.  which we expect to be January 2016, while keeping the export tariff as a route to market for the renewable electricity they generate.

Proposals will create market chaos

RenewableUK, the body which represents organisations involved in wind and marine renewables - is warning that complex rules would in the long term scare away many of the people who could most benefit from the scheme, and in the short term create market chaos.

RenewableUK’s Deputy Chief Executive, Maf Smith, said while it was important that everyone worked to manage costs, it looks as if the long term vision has been lost, commenting:

 “What we needed in this Review was a clear vision for how we get to a point where cost effective, small-scale renewables are common-place, with all homes and businesses able to be part of a productive, vibrant low carbon economy. This Review is not about how we build that prosperous future but simply about short term politics and accounting.”

RenewableUK is also expressing concern about the speed at which Government is making these changes. Maf  Smith continued: “We’re also concerned about the timing of this review. Only last month Government consulted on ending pre-accreditation. Now they are consulting on reducing tariff rates, and capping deployment. But such significant changes can’t be introduced within the proposed January 2016 deadline without hurting many businesses and individuals who have been investing in new projects. The next four months will turn the British energy market into a wild-west market with energy consumers stuck in the middle.”

FIT proposals a “disaster” for AD growth

The Anaerobic Digestion and Biogas Association (ADBA) has described the FIT proposals as a ‘disaster’ for AD growth. According to the Association, the proposal to limit the FITs scheme to a maximum overall budget of £75-100 million from January 2016 to 2018/19 will have a disastrous affect on investor certainty and therefore any further deployment. DECC are proposing to support just 17 new AD plants in 2016.

ADBA’s Chief Executive, Charlotte Morton, explained:

“The FIT consultation proposes restricting support for anaerobic digestion to just 17 new plants next year – which would effectively mean an 80% cut in investment for an industry which deployed 89 clean baseload power plants in 2014.” 

“This should be the time to build on our foundations, not dismantle them. Support of AD offers a fantastic return on the taxpayer’s investment, providing baseload electricity to help keep the lights on, offering cost-effective greenhouse gas reductions and growing a domestic supply chain which can export to the world.

“If DECC’s current proposals go ahead, the results would prove disastrous for the renewables industry, and for the UK becoming a high-productivity leader in the world’s green economy.”

“The last thing British clean energy needs is boom and bust: limiting industry’s growth in this way, especially before DECC has even consulted on appropriate support levels for the technology, will inevitably mean dismantling teams with global ambitions and losing jobs. We will be working with our members to respond strongly to the proposals and demonstrate the excellent value for money which AD provides.”

Earlier this week ADBA highlighted the progress that the industry has made with the support of government incentives, with the anaerobic digestion (AD) industry now delivering an electrical equivalent capacity (electricity and biomethane) of 514 megawatts across 411 plants in the farming, waste and water sectors.

Responding to the proposals, Merlin Hyman, chief executive of Regen SW said:

"Today's announcement puts at risk thousands of jobs and will undermine the opportunity for local people, businesses and communities to take control of the way we generate, use and supply energy”.

 “We share the government's ambition to reduce and eliminate subsidies but these proposals put at risk the remarkable progress the renewable energy industry is making with deployment and cost reductions."

EEF - review is "long overdue"

However, manufacturers’ organisation EEF has welcomed the review - Richard Warren, Senior Climate & Environment Policy Adviser at EEF said:

 “With the costs of government energy policy surpassing previous projections and, the Levy Control Framework budget already looking like it’s been maxed out, government is right to be getting to grips with the issue. DECC’s number one priority has to be delivering emissions reduction at the least cost to consumers and the Feed in Tariff (FITs) scheme is palpably incapable of doing this at present.

“Even with significant cost reductions achieved in recent years, the FiTs scheme reduced carbon at a woefully inadequate rate of £380/tonne last year almost double even that of offshore wind at around £200/tonne. A review is long overdue.”

Deadline for responses to the consultation is 23rd October – click here to download the consultation document.