The surprise election of a Conservative majority last month brought with it the promise of an end to new subsidies for onshore wind power. Recently-appointed energy and climate change secretary Amber Rudd has wasted no time in putting the wheels in motion, outlining proposals for the changes earlier this month. Addressing the House of Commons Ms Rudd said: "Onshore wind is an important part of our current and future low-carbon energy mix. But we are reaching the limits of what is affordable, and what the public is prepared to accept." The renewables obligation (RO) subsidy scheme will close to new onshore wind projects from 1 April 2016, exactly a year earlier than originally planned.
However the government has proposed a grace period for projects that, as of 18 June, had planning consent, a grid connection offer and acceptance of land rights for the site upon which they plan to build. It estimates that up to 5.2 gigawatts (GW) of wind capacity will be eligible for grace periods. Yet the Department of Energy and Climate Change (DECC) also predicts that around 7.1GW of proposed capacity across the country will not meet these conditions and is now unlikely to go ahead. This equates to around 250 projects totalling 2,500 turbines unlikely to be built.
The policy has ramifications for some wind energy groups and makes investment in the sector more risky. This is because new onshore wind projects will now need to bid under the contracts for difference (CFD) regime, rather than being automatically eligible for funding under the RO scheme. Under CFD, low-carbon generators are paid the difference between the estimated market price for electricity, known as the 'reference price', and the estimated cost of developing the technology or the 'strike price'. It is unlikely that projects will be taken up if they involve a larger level of funding.
Management at wind and landfill gas generator Infinis Energy (INFI) said the company is confident it will be able to build out its target 130-150MW in full under the RO regime. It also confirmed that its A'Chruach and Galawhistle wind farms in Scotland will remain eligible to be built under this subsidy framework. But onshore wind developer Renewable Energy Generation (WIND) faces uncertainty over some of its plans. It currently operates 11 wind projects across the UK, with a total capacity of 34.7MW, and has an additional 38MW of projects that meet the DECC's grace period conditions. Chief executive Andrew Whalley says the company has another two projects that are yet to receive confirmation and that the group is awaiting further clarity on grace periods.
SSE (SSE) has invested significantly in onshore wind and has 1GW of operating capacity in the UK, as well as 280MW of capacity under construction. SSE previously stated that it was well placed to add additional capacity prior to the previous RO deadline of April 2017. Analysts at Jefferies reckon it is unlikely that SSE will be able to complete all of its proposed capacity by the earlier 2016 deadline.
