The full significance of the Treasury’s increasingly firm grip on spending to support renewables, culminating in the announcement of a moratorium on new subsidies for renewables is now becoming apparent. Applications for renewables in the UK planning system are falling away, and, in spite of a large slush pile of projects with planning consent, total operational capacity is not increasing rapidly.
After nearly twenty years of extremely aggressive UK government support for renewable electricity development, the industry is now, all would agree, at a turning point. Whether it is a turning up or down is still under question. A report in yesterday’s Financial Times may be taken as representative of the doubts:
Investment in UK renewables fell 56 per cent last year, to $10.3bn from £23.4bn in 2016, according to Bloomberg New Energy Finance, a research organisation. To some this was a calamitous loss of momentum, to others a healthy sign of an industry maturing after initial subsidy-fuelled growth. (“UK faces tough choices to keep the lights on in a low-carbon future: Funding constraints collide with switch to low-carbon electricity generation”.)
This uncertainty reflects broad changes in the case for renewables over the last five years or so. After years of astonishingly generous income support, costing consumers upwards of £20 billion since 2002, the industry has become aware that the patience of government and Treasury, to say nothing of consumers, is wearing thin, and rather than simply urging the necessity of their technologies in climate policy they have preferred to suggest that they are, as the FT puts it, “maturing”. Brazenly, this argument is often a prelude for a demand for further subsidy, as in a recent Guardian article (“Fears for future of UK onshore wind power despite record growth”), though frequently with ingenious and specious sophistications; the source quoted by the Guardian made the claim that subsidy is only necessary to “reduce the cost of capital”.
The government will obviously have to take a view on this matter, and in assessing the general claim that tremendous progress has been made but just a little more help is needed, analysts will be looking to see if there really are signs of spontaneous life in the sector. Would further subsidy be throwing good money after bad, or would a stern refusal be short-sighted spoiling of the offshore wind farm for a ha’p’orth of tar?
Fortunately, government has itself been collecting data that bears on this question, in its Renewable Energy Planning Database (REPD), the latest release of which has just been published (REPD, 18 January 2018), a dataset that tracks applications for planning permission of larger projects (≧ 1 MW). This clearly misses much small scale development, but it catches the bulk of the renewables sector in in its heavy industrial form.
While the monthly snapshot for December 2017 is interesting in itself, it is the evolution of this dataset over the last two, crucial years that gives us the full picture. This can be seen in the following chart, drawn from the REPD archives. The stacked bars and the lefthand axis give a monthly snapshot of the total of renewables capacity seeking planning permission in each month from September 2015 to December 2017, broken down by technology group (data for July 2016 is unfortunately missing from the set I used, and I am waiting for it to be supplied; it’s omission does not seem likely to change the conclusions). The dark red line represents the total renewables capacity with planning permission, a quantity that includes operational capacity and also that with permission but still under, or awaiting, construction. This quantity rises over the period from 54.1 GW to a peak of 59.9 GW before falling slightly to 59.5 GW. The dark grey line represents operational capacity only, which rises from 23.7 GW to 31.7 GW.
Figure 1: Renewables capacity in planning, in monthly snapshots (GW, stacked bars, left axis), September 2015 to December 2017; and on the right axis, the total consented renewables capacity (GW, dark red line), and total operational capacity (GW, dark grey line). Source: Department of Business, Energy and Industrial Strategy (BEIS) Renewable Energy Planning Database (REPD). Data archived by the Renewable Energy Foundation: http://www.ref.org.uk/planning/index.php.
The first most salient feature of the planning data is that since the closure to new entrants of the Renewables Obligation (RO) subsidy scheme on the 1st of April 2017 the volume of capacity seeking permission in the planning system has collapsed, from nearly 10 GW in January of that year to under 4 GW at present. This is not a vigorous pipeline.
Equally clear is the fact that the capacity in the planning system had been declining steadily since late 2015, as various sectors saw reductions in their subsidies and then closures of entire schemes. All technologies are affected, with only onshore wind surviving in any quantity, and that much reduced and confined to Scotland where it expects special favours.
The chart also shows that the industry as a whole has maintained a very large slush pile of consented projects, with its construction rate never threatening to exhaust the reserve. The addition of a substantial quantity in the dying days of the Renewables Obligation appears to have had a slightly positive affect on construction rate, probably as projects worked hard to meet the qualifying deadlines for subsidy, but since the middle of 2017 the construction rate appears to be slowing, if anything. As large projects supported under the CfD scheme are added, if they ever are, the capacity will grow by fits and starts.
A collapsing pipeline and a stuttering growth curve are not suggestive of a fundamentally viable industry that has nearly but not quite outgrown the need for subsidy. On the contrary, it seems that without blood the vampire sickens.