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Conservative hostility to wind subsidies "highlights challenges" for new Energy Secretary, say experts

Hostility from Conservative MPs over support provided to renewable energy projects highlights the "challenges" new Energy Secretary Ed Davey faces his first week in the job, according to energy law experts.07 Feb 2012

Paul McQuillan of Pinsent Masons, the law firm behind Out-Law.com, said that Davey, who was appointed Energy Secretary on Friday, had to convince the market of his comment that "although there has been a change at the helm, there will be no change in direction or ambition" in the Government's energy policy.

"Whatever the reasoning behind Government policy, the sums behind development and delivery by industry start with the income to the commissioned plant. Without a degree of certainty behind the income to a project it is very difficult to make a positive financial investment decision," he said.

Over the weekend more than 100 Conservative MPs and other backbenchers wrote to the Prime Minister urging him to "dramatically cut" support for wind turbine generation. The MPs also called for David Cameron to tighten up planning laws to give local residents more power to stop new wind farms being developed in their area. Extracts of the letter were published by the Sunday Telegraph.

"In these financially straightened (sic) times, we think it is unwise to make consumers pay, through taxpayer subsidy, for inefficient and intermittent energy production that typifies onshore wind turbines. We also are worried that the new National Planning Policy Framework, in its current form, diminishes the chances of local people defeating onshore wind farm proposals through the planning system," the letter said.

There are currently more than 3,000 onshore wind turbines in the UK with a further 4,500 expected as part of the Government's programme of electricity reform. However, critics have argued that wind turbines are an unreliable source of power as well as an eyesore.

The Department for Energy and Climate Change (DECC) already proposed cutting financial support available to onshore wind generation by 10% from 2013 as part of its review of renewables obligation certificates (ROCs); however, financial support for electricity generated through wave and tidal stream technologies will be more than doubled. The renewables obligation is the main financial support mechanism used to encourage the development of large-scale renewable electricity generation projects.

Renewables expert Nicholas Shenken, also with Pinsent Masons, said that the headlines were "unlikely to help" an industry which is already "pointing to any lack of cohesive policy as barriers to investment in an already moribund economy".

"It seems that Ed Davey needs to deal not only with implementation of Government policy, but actually an internal debate around the existing policy's merits," he said. "While the information available today suggests that those who believe the policy is flawed are not against renewables per se, what seems to be lacking is an identification of which renewable technologies and what deployment strategy would better serve the ultimate low carbon goal."

Davey visited a green homes testing site near Watford together with Deputy Prime Minister Nick Clegg on Monday where he set out the "simple" priorities for his new role: "green jobs, green growth and getting the best deal for energy bill payers".

"By focusing on the low carbon industries of the future we can rebalance our economy, reducing our dependence on the City of London on the one hand, and on oil and gas imports from unstable parts of the world on the other. There may have been a change at the helm, but there'll be no change in direction or ambition," he said.

His work will also include implementing the Electricity Market Reform (EMR) programme, which the Government has claimed will bring about the widest reforms of the electricity market since privatisation. EMR intends to attract investment to increase security of supply while encouraging low-carbon generation sources and reducing the impact on consumer bills.

The UK will lose around 25% of its electricity generation capacity over the next decade due to ageing power plants and more stringent environmental standards, while an increasing amount of the country's power will be generated from intermittent sources such as wind.

The Government's energy policy over the last few years has attempted to "unblock blockages" to investment, energy law expert McQuillan said, whether such investment is driven by the need to fill the 'energy gap' or by security of supply considerations, he said.

A strand to implementation of policy is to provide support to novel technologies at early stages in order to focus research and development spend and ultimately to reduce unit costs so that the support can be reduced over time.

In addition "The renewable lobby has gone to great pains to point out that renewable technology of all kinds creates jobs at all stages of the process including research and development, in the supply chain, and at the construction phase and in operation," he said.

"The need to support novel technology has been one of the main focuses of the feed-in tariff (FiT) regime, and in fact the unit cost of solar technology has reduced rapidly. However, this could have as much to do with the disturbance of the FiT support from the fledgling industry as it has to technological advancement and the scaling up of the industry," he said.

Last month the Government failed to overturn a High Court decision that its plan to reduce FiTs for solar photovoltaic schemes completed 11 days before a consultation on the reductions ended was unlawful. Before he resigned, Chris Huhne said that the Government would be seeking leave to appeal to the Supreme Court.

DECC intends to publish the full outcome of its FiTs consultation, alongside proposals for the next phase of its comprehensive review of the scheme, on Thursday.

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