Tuesday, 24 July 2012

Lib Dems win battle with Treasury over green energy subsidies

It looks as though Lib Dem Energy Secretary Ed Davey has come out on top in his battle with Chancellor George Osborne over the level of subsidies that renewable energy producers will get in the future.

This has been a hugely volatile issue ever since the coalition took power. They inherited a regime which promised massive payments to domestic and commercial producers of green energy in the form of a high 'feed-in tariff' - the amount paid for every unit of energy fed into the system. Whilst this high level helped to kick start the building of green power systems, it probably wasn't sustainable in the long term.

And so, under Treasury orders, the feed-in tariff was cut overnight. Those people with schemes being built complained that they were being discriminated against and the court allowed a period of grace before the cut came into force. One of the developers to miss out was Cornwall Council which had planned a major solar farm at Newquay Airport. Plans for that went into the bin.

Since then, the Treasury has again demanded a cut in subsidies and the debate has raged between the Chancellor's preferred 25% and Ed Davey's favoured 10%. The producers claim that anything more than a 10% cut will make green energy unprofitable. Of course they would say that, wouldn't they. But that doesn't make it untrue.

What is clear is that, like most businesses, green energy producers need a period of stability. Continued revisions to the feed-in tariff, other subsidies or regulatory backgrounds (and that includes planning) really won't help. Let's have some stability and hope that developers will build good quality schemes in the right places. If they don't then that is the time to consider tweaking subsidy levels.

I've always been pre-disposed to favour wind and solar power schemes. They have to be in the right place, of course and we shouldn't be nodding through everything that is put before us. But the alternative, as the government has made clear, are more nuclear power stations. I know which I would prefer in Cornwall.

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