Just days after agreeing to the low carbon energy future at the climate change conference, the government has cut renewable energy subsidies by over 60%.  After consultations, the new measures to deal with the projected over allocation of the renewable energy were announced today.

Energy bills pay for the renewable energy subsidies through schemes such as the Feed-in Tariff scheme and the Renewable Obligation scheme. A set amount which would be paid to renewables by 2020 was decided upon by the government. However, earlier this year the Office of Budget Responsibility predicted that the amount would be increased. Several actions have been taken by the government to reduce overspend including the announcement to cut on the subsidies made today.

Feed-in Tariff

This is a where you get paid for the electricity you generate from renewable energy sources it can be either solar, wind, hydro or Anaerobic Digestion power. In this scheme you get paid for all the energy you produce for your use and also the surplus that gets exported to the grid.

There has been review consultation which proposed updated tariffs and asked for opinions from the public and industry. All the feedback was put into consideration and the government announced revised tariffs, these included a new tariff for domestic-scale solar of 4.39p /kwh from February instead of the existing 12.47p.

A sustainable return for everyone investing in small scale renewable technology is provided by the new tariff rates. This is achieved without imposing unnecessary burdens on the bill payers who subsidise the renewable energy. In a statement, Energy Secretary Amber Rudd said she wanted to keep household bills ‘as low as possible’ while maintaining ‘sensible’ support for new technology.

My priority is to ensure energy bills for hardworking families and businesses are kept as low as possible whilst ensuring there is a sensible level of support for low carbon technologies that represent value for money, she said.

We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model. When the cost of technologies come down, so should the consumer-funded support.

Renewable obligation

It came into effect in 2002 in England and Wales, and Scotland, followed by Northern Ireland in 2005. This gives an obligation to the UK electricity supplier to source an increasing proportion of the electricity they supply from renewable sources.

In this scheme the government has announced that for solar PV with a capacity of 5MW and below the following changes will occur;

  • From 1 April 2016 close of all solar PV with a capacity of 5MW and below across the Great Britain
  • A grace period to protect developers who made a significant a financial commitment on or before 22 July 2015 and those who experience grid delays beyond their control.
  • Provide clarification of the planning evidence for the significant financial commitment grace period to exclude incomplete or invalid applications
  • There will be removal of all fixed rate of support from the date of accreditation from 22 July 2015 for solar projects in England and Wales with an exception for those which meet the significant financial commitment criteria as of 22 July 2015.
  • A solar specific banding review will be held in England and Wales and consult on new bands for 2016/17
  • Consultation will be held on an exception designed to provide projects with protection against reduction in support where they qualify for the grandfathering exception.

Secretary of State for Energy and Climate Change, Amber Rudd, said:

Government support has driven down the cost of renewable energy significantly. As costs continue to fall and we move towards sustainable electricity investment, it becomes easier for parts of the renewables industry to survive without large subsidies.

Today’s announcement has given a total reduction of £500m-£600m from the LCF overspend.

However the announcement has received criticism from various quarters as others are terming it misguided. The announcement will place big limitations to the solar industry and many people will lose their jobs and especially those who specialized in solar panels installation.