Big changes for renewable subsidies

The government is to make big changes to the way it subsidises renewable energy, the BBC has learned.

Ministers will announce that they will cut support for onshore wind and solar energy, but give more backing to offshore wind power.

Chief Secretary to the Treasury Danny Alexander described the shift in subsidy as “a rebalancing” and said overall spending would not change.

But Labour said “chopping and changing” pricing was bad for business.

The set prices for onshore wind power and solar energy will be cut from 2015, while those for offshore wind power will be increased.

The final figures will be announced in a written ministerial statement later.

Encourage investment

The latest “strike prices” were published in draft in June, but BBC deputy political editor James Landale says there will be major changes.

Sources from both coalition parties said there had been so much investment in onshore wind and solar energy that they no longer needed so much state support.

In contrast, they said, offshore wind sources still needed more subsidy to encourage long-term investment.

Mr Alexander denied suggestions the move was in response to Tory MPs unhappy at wind farms being sited in their constituencies.

James Landale says that both Conservative and Liberal Democrat sources said the decision made good political sense because they would have a policy that countered the threat from UKIP which opposes all wind farms on principle.

Strike prices are set substantially above the current value of energy, as a form of long-term subsidy to encourage firms to invest.

One Conservative source said he expected “quite a dramatic cut” in prices for onshore wind in 2015 and beyond. Another spoke of the “beginning of the end for mature renewables”.

One source said: “We are in a very good place. If we didn’t curtail onshore a bit, we would have so much onshore that the constraint wouldn’t be financial but political. Ditto solar.

“So constraining solar and onshore makes good value for money sense, it lets us move quicker than expected to market forces, and enables us to ensure that the one renewable technology that can go to scale in the 2020s – offshore wind – gets the early support that an immature technology needs.”

Energy Minister Michael Fallon said costs must be spread “much more fairly”

‘Spread more fairly’

Shadow chief secretary to the Treasury Chris Leslie told BBC Radio 5 live: “They’re just chopping and changing all the time – very bad for stable, long-term investment.”

Energy Minister Michael Fallon hinted at changing the policy in a speech earlier this week.

He said: “We will also announce very shortly now the final support prices for each renewable technology. Of course new power has to be paid for and we should be open about that.

“But investment in renewables cannot be done at any price. It must be affordable for consumers. And the cost of that new investment needs to be spread more fairly, much more fairly.”

The Energy Secretary, Liberal Democrat Ed Davey, hinted at the more positive news for offshore wind energy in an interview with BBC Radio Humberside on Monday.

He said: “Later this week we will be announcing the final plans with our reform package, with what are called the strike prices, the prices that offshore wind developers would get, and I think that will be yet another shot in the arm of confidence.

“We have put in place a very attractive set of measure which will boost renewables, boost offshore wind and I believe bring green jobs to places like Hull.”

Mr Davey also told MPs last week: “There will be some good news to announce on offshore wind shortly.”