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Subsidies Row: Green Energy Is Turning Into A ‘Political Risk’

Delays and political interference in the setting of subsidies for wind farms may deter investment in the UK, energy companies have warned.

Ministers had been due to announce revised subsidy levels for renewable energy technologies yesterday – a decision originally due in the spring but delayed amid political infighting over the scale of cuts for onshore wind farms.

However The Daily Telegraph revealed yesterday that the decision had been delayed again, with Chancellor George Osborne demanding cuts of 25pc, to be phased in over several years, but Deputy Prime Minister Nick Clegg thought to insist the cut be limited to the 10pc recommended by the government’s review.

Keith Anderson, ScottishPower’s chief corporate officer, said the company was “worried” by the delay and warned: “One of the key advantages of the UK as a place to invest is the predictable nature and stability of its regulatory regime. Sticking to the evidence and the timetable is key to investor confidence.”

He had previously warned that, if political intervention were to override evidence-based outcomes, the company might have to start considering “political risk” when deciding whether to invest billions of pounds in the UK.

While the political row is understood to centre on onshore wind farms, the review will also determine subsidies that are crucial for other renewable technologies such as biomass.

Drax, whose future strategy hinges on increased use of biomass, saw its shares fall 5.67pc yesterday. In February it cancelled plans for a dedicated biomass plant because proposed subsidies were too low, and said it needed higher subsidies if were to invest £450m on converting its existing coal-fired power station to run mostly on biomass.

Gaynor Hartnell, chief executive of the Renewable Energy Association, warned yesterday that the delay to the subsidy decision was “immensely damaging to the industry” as “developers need certainty and soon”.

Phil McVan, of turbine provider Myriad CEG Wind, said the situation “hugely affects the confidence of businesses and investors”.

But Energy Secretary Edward Davey played down the wind farms row, insisting there was “no one” arguing for cuts on the scale of 25pc and blaming the delay on a “logjam”.

He claimed the Treasury had been working “very well” with his department, adding: “The critical thing is that, when we announce it, the decisions are evidence based.”

The Daily Telegraph, 18 July 2012