The UK government today promised to “maintain” its ambition for renewables, despite Chancellor George Osborne’s pledge to shield businesses from the cost of supporting wind and solar.
In his annual Budget today, Osborne laid out a plan to
cap the cost of emitting carbon from fossil fuel-fired power stations in an ostensible sop
to the country’s energy-intensive manufacturing sector, which benefits from cheap electricity.
The government claims that the move will in no way affect the
amount of support available to renewables via the Levy Control
Framework, nor dent its “ambition to increase renewable generation” in the
RWE npower chief executive Paul Massara, however, questioned
the notion that Britain can change the rules governing its energy industry yet
again and still attract investors.
“Changing the carbon price support that is the foundation of
the new Energy Act less than three years after its inception will impact on …
[Britain’s] ability to find investors for the billions of pounds worth of
energy infrastructure that Britain still needs to build an energy future that
is both secure and low carbon,” Massara says.
Gordon Edge, director of policy at the trade group RenewableUK, said the announcement could "chill the mood of some investors in clean energy projects".
Amid tumbling carbon prices within the EU’s Emissions
Trading Scheme, the UK several years ago announced plans for the so-called
Carbon Price Floor as a way to bolster investment in low-carbon energy
The price floor – which went into effect last April –
essentially acts as a top-up to whatever emitters are required to pay for
carbon permits under the EU ETS.
Today, however, the UK government said it would cap at £18 ($30)
per tonne of CO2 the difference between its Carbon Price Floor and the EU ETS
carbon price between 2016/17 and 2019/20 – claiming that doing so will save
British businesses £1.5bn a year by 2019, making them more competitive with their Continental rivals.
The carbon price freeze is good news for Britain’s
coal-fired generators, which will remain competitive against gas and renewables
for longer as a result, says Phil Grant, an energy specialist at the
consultancy Baringa Partners.
With the carbon price freeze in place, power prices in Britain
will be about £2/MWh lower in 2016/17 than they otherwise would have been, says
Separately, the government will from 2016/17 offer up a new
pot of £500m per year to help energy-intensive industries offset the higher
electricity costs resulting from the UK’s Renewables Obligation and feed-in tariff.
While providing no new support to wind and solar, Osborne also
offered another £60m ($100m) to help develop technologies related to carbon
capture and storage.
Osborne says the budget will “radically reduce the costs of
energy policy for business – particularly in manufacturing – while improving
security of supply and maintaining the government’s ambition to increase