solar fieldIn the past few months, we have seen some challenging developments in the renewable energy sector. Two key announcements from the Government have stripped away the stabilising wheels for clean energy, removing some of the incentives on which the industry has relied, making it harder to progress. The reasons were effectively that prices for renewable energy has come down as to no longer require the same level of subsidy that it did five years ago.

The first announcement came in July 2015, when HMRC proclaimed that renewable electricity would lose its exemption to the Climate Change Levy, a tax on the supply of commodities to businesses. Renewables have been exempt from this charge since is was introduced in 2001, providing a subsidy for low margin investments in renewable generation.

The reason given for this change is to “correct an imbalance in the tax system by preventing taxpayer’s money benefitting renewable electricity generated overseas”. However, this logic is refuted by industry insiders who argue that more than 70% of the Levy Exemption Certificates went to UK providers. The removal of this tax exemption could mean a drop in income for some renewable schemes of between 5-6%. Although this may not sound like much, this could mean the difference between sink or swim for some smaller companies, as Dr Gordon Edge of RenewableUK explains:

“Yet again the Government is moving the goalposts, pushing some marginal projects from profit into loss. It’s another example of this Government’s unfair, illogical and obsessive attacks on renewables”

The great irony is that because the renewable industry is nearing price-parity with fossil fuels, and because the Government wants to ensure low energy prices for hard-working families, the requirement of clean energy generators to pay toward the Climate Change Levy will lower their profit margins, meaning they will need to raise prices in order to compensate.

The second measure affecting the renewables industry came from the Department of Energy & Climate Change (DECC), when it announced on 22 July 2015 that it would be removing preliminary accreditation from the Feed-in-Tariff. Pre-Accreditation means giving green energy generators a guaranteed tariff level in advance of a project being commissioned, which is vital for financial modelling and creating investment offers. Removing this guarantee means that energy providers would receive the tariff rate as at the date they apply for full accreditation. In the DECC’s own words, “this will mean that a developer will not be certain of the level of suport they will receive under the scheme until the point at which their application is received by Ofgem”.

According to the DECC, pre-accreditation was introduced to “remove a large degree of risk” and to “offer greater certainty to industry”.  The table below illustrates the huge increase of installations deployed under the FiT pre-accreditation scheme since it was introduced in 2012:

pre-accreditation graph 1

So what could be the reason for removing such a successful incentive now? The rationale provided by Amber Rudd, minister of DECC, is that there has been a much greater uptake in renewable energy projects than was forecast. Predictions had been for approximately 750,000 new renewable installations nationwide between 2010-2020, whereas the reality is that there have already been 700,000 installations as of 2015. This has “significantly outstripped expectations”, meaning that budget forecasts for 2020 are no longer workable.

It makes no sense that at the same time we’re told climate change is the fight of our generation,  we are being also being told that the UK cannot afford the present pace of renewable growth.  Or that energy security is a big national priority, then stop the support for the one area that provides it.  It is tragic that just as renewables are challenging fossil fuels for market dominance, their progress has been curtailed. The irony of the green industry being punished for exceeding expectations is absurd, especially at a time when financial incentives for fracking are are on the rise. As David Attenborough said in his recent interview with Barack Obama, to transition to a low-carbon economy all we need to do is make renewables cheaper than fossil fuels, and common sense market mechanisms will do the rest.

However, there is cause for optimism. Given the tremendous advances in the efficiency of renewable technology, as well as the recent growth of solar power in the UK, perhaps Amber Rudd and DECC are right; perhaps the renewable industry is resilient enough to ride without support. And the decision to cut the Feed-in-Tariff has not yet been settled either, with consultations underway (please complete this one by 10:10 here), so if you do feel this is wrong, contact your MP and let them know.

Moreover, even without the subsidies of the past, there are still enormous opportunities to lower our energy bills as well as carbon emissions through energy efficiency measures, such as insulation, draught-proofing, or double glazing.

If the recent developments in the renewable industry have highlighted one thing, its that communities cannot rely on fluctuating external factors if they desire a stable and fair energy supply. To defend our communities against such unexpected changes in the future, we need to take control of our own energy networks, which will ensure resilience and price stability.

And what’s more, we will not be penalised for our successes.

The United Kingdom is the fourth richest country in the world. It is a cornerstone of the global economy, with billions of pounds of investment pouring in each year. We have a highly educated workforce, access to the most advanced technologies available, and have enjoyed tremendous (though diminishing) international influence ever since Thomas Newcomen invented the steam engine 300 years ago.

 

So why is the UK not a leading light in the quest towards a green and sustainable future?
Why, in 2012, of all 28 member states was the UK the third lowest producer of renewable energy in the European Union, ahead of only Luxembourg and Malta?

 

energy_from_renewable_per_c

 

It certainly isn’t due to an absence of means. According to figures from the National Audit Office, the Exchequer was able to find an astonishing £1,162 billion to support the banks during the financial crisis of 2008.

 

The British government’s response to a crisis it seems, is based less on the resources available than upon their idea of what is labelled a ‘crisis’. If the vested interests of the City of London are threatened for example, then evidently no expense will be spared to ensure its survival. If a crisis involves the survival of planet Earth however, and all the millions of species that depend on it, including us, then we see quite a different picture entirely.

 

As part of the Renewable Energy Directive agreed by the European states in 2009, the UK is committed to achieving 15% of its energy needs from sustainable sources by 2020. As a barometer of progress, we were supposed to have achieved 10% by 2010, but this target was missed. True, the UK has made much progress over recent years with the introduction of the Feed-in-Tariff and the Renewable Heat Incentive, but it is far from certain that we will reach our goal of 15% in five years from now.

 

One thing that is certain, is that the UK has not embraced the transition to a sustainable economy in the same way as our European neighbours. Iceland is able to supply 85% of the country’s housing with heat from geothermal energy.
Sweden leads the EU with 52% of its energy coming from renewable sources, followed by Latvia, Finland, and Austria which are able to generate a third of their energy needs sustainably.

 

So why does the UK have such an unambitious target only 15%, which many say will not be met by 2020? A major reason is surely our love-affair with nuclear power. The UK currently has 16 reactors with a total generating capacity of 10 gigawatts of electricity, and plans to increase this to 16GW with the first new reactors expected to be operational in the early 2020s. This new generation of nuclear power stations will require a total investment of at
least £60 billion, and that does not take into account the ‘nuclear clean-up market’ which is estimated at £70 billion at Sellafield alone. It is abundantly clear that our policy makers are determined to steer us towards a future that benefits the big corporations that inform them.

 

 sellafield

 

Unfortunately for us however, nuclear is definitely not the answer. Often, the public is subject to a vociferous campaign of disinformation surrounding nuclear energy. The reality is that nuclear power poses major security and environmental risks, is heavily dependent on taxpayer subsidies, and generates deadly radioactive waste that remains dangerous for thousands of years. Furthermore, the processes involved in mining and enriching uranium, the construction and dismantling of a nuclear plant, and the transport and disposal of hazardous waste are anything but ‘low-carbon’.

 

So what does this mean for renewable energy in Britain, where our government are happy to spend £100 billion to renew a Trident Nuclear Defence system, while cutting subsidies to renewable energy? In the same way that the Civil Rights Movement was born of a frustration with government inertia, we too cannot stand idly by and wait for our leaders to show us the way to a sustainable future.

 

If the UK is to meet its green energy targets, then the momentum must come from the grassroots. In the absence of leadership from above, we must invest in renewables at a community level, and take control of our energy fut
ure. BHESCo is committed to establishing the first community owned micro-grid in Brighton and Hove, helping to set down a blueprint for others to follow, and moving the UK towards our targets for 2020 and onwards.

 

300 years after Newcomen’s steam engine, its time for a new revolution in England…

 

 


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