Government plans to bring Renewables Obligation (RO) subsidies for onshore wind projects to an early end were struck down in the House of Lords this week. Whilst many developers will welcome this rare reversal in favour of the renewables industry, the continued uncertainty is unlikely to do anything to improve investor confidence in UK renewables.
Peers passed shadow energy minister Baroness Worthington’s amendment to remove clause 66 from the Energy Bill, which provided for the closure of the RO to onshore wind from 31 March 2016, by 242 votes to 190.
The government’s planned early termination of the subsidies included scope for the government to make further provisions as to subsequent grace periods. However, proposed amendments in the House of Lords sought to introduce such measures in the bill itself.
The grace periods proposed focused around three main delays that could occur and hold up the accreditation of a wind project:
- a delay in grid or radar works that needed to be carried out to build the plant or expand its capacity;
- a delay in the eventual grant of planning permission, including any relevant appeals processes; and
- a delay in the grant of relevant debt finance due to the lender’s unwillingness to invest prior to the Energy Act 2016 being given Royal Assent.
In each case, the inclusion of a delay would ensure a grace period up to 31 March 2017, or if there were a combination of any of the delays, the grace period could stretch to 31 March 2018.
Concerns around the perceived unfairness of what could allow generators to apply for this grace period and what would not be allowed appear to have been at the heart of the opposition in the Lords, although this did also raise a constitutional issue.
By a convention known as the Salisbury Doctrine, the House of Lords does not oppose a bill that is proposed under the government’s election manifesto and the Conservative election manifesto promised to end any new public subsidy for such projects.
Whilst the debate continues over whether new RO certificates under an existing subsidy regime falls within this manifesto aim, the renewables industry continues to work in uncertain times. There is now a little more time to influence the debate on the closure of RO to onshore wind and, in particular, the criteria for qualifying for grace periods but many will be keen to end the uncertainty and plan and invest in a stable regulatory environment once more.