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UK's Davey rebuffs RWE call for RO scheme extension

UK energy secretary Ed Davey has rejected out of hand a call by German utility RWE to give the UK's current renewables support regime an extended lease of life.

RWE – a big player in British renewables via its Innogy and npower businesses – says it “remains concerned at the breadth and impact of the fundamental change currently proposed for the UK energy sector” and is calling for an extension of the existing Renewables Obligation (RO) support scheme until 2020.

As the UK government launched its long-awaited Energy Bill, the company says a smooth transition from the existing regime to the new contracts-for-difference (CfD) mechanism that will replace it is far from guaranteed under current proposals.

RWE says: “To enable continued development and investment, industry and investors need a period of parallel running which is commensurate with the lead times for large scale projects, such as offshore wind, and the operational period required for the CfD to bed in.

“The delay to the EMR (Electricty Market Reform) timetable already experienced makes the proposed lag between the first CfD contracts and the proposed closure of the RO in 2017 insufficient," claims RWE.

“Extending the RO until 2020 would provide developers with a backstop option that enables continued investment and growth, whilst Industry becomes comfortable with the benefits of the CfD.”

But speaking after he launched the Bill in the UK parliament, Davey said: "It will not be extended. It will go to 2017 as we've always said."

Davey says he does not accept RWE's point that developers will need more time to "become comfortable" with the CfD mechanism that will replace the RO.

"We're running CfDs alongside ROs until 2017 and people will have three-plus years to get used to them, as well as having seen the idea through the design process.

"So by the time we get to 2017, I think these will be investable mechanisms that people will be very comfortable with."

Davey notes that the government has not invented CfDs "out of thin air", pointing out that they are already in use in other European countries such as Denmark.

"For some people these will be new things," Davey says. "By the time we get to 2017, they won't be."

Updates earlier article to add reaction from Ed Davey