Dec. 4 (Bloomberg) -- The U.K. government said it expects 40 billion pounds ($65 billion) of investment in renewables by 2020 after shifting incentives toward offshore wind power and away from projects on land in areas where residents object.
The Treasury published a list of final “strike prices” for electricity from renewables in its national infrastructure plan today, cutting support for solar parks and onshore wind farms and raising them for turbines at sea. The sums represent the guaranteed amount that generators earn under long-term contracts designed to stimulate investment in low-carbon energy.
“This package will deliver record levels of investment in green energy by 2020,” Energy Secretary Ed Davey said in an e-mailed statement. “Our reforms are succeeding in attracting investors from around the world so Britain can replace our aging power station and keep the lights on.”
Prime Minister David Cameron has faced opposition from rural communities to expanding wind farms and solar parks, which some residents say are a blight on the countryside. The government must balance those concerns with the need to attract 110 billion pounds ($180 billion) to replace aging power stations and meet renewable energy and carbon targets.
The government is trying to spur offshore wind in an effort to boost U.K. jobs and manufacturing. Those have been set back in the past month after RWE AG scrapped a 4.5 billion-pound offshore project, and Centrica Plc said it’s still deciding whether to push ahead with another.
The energy department said today that deployment of 10 gigawatts of offshore wind power by 2020 is “achievable,” while emphasizing that figure doesn’t represent a target.
Sixteen renewable power projects are in the pipeline to receive contracts guaranteeing energy prices, Davey’s department said. Almost 11 gigawatts of onshore and offshore wind have planning consent and are awaiting construction, compared with total installed renewable capacity of over 20 gigawatts at present, the department said.
Two of Drax Group Plc’s units were included in the list of projects that have progressed in their bids for contracts. Shares of the company, which runs the U.K.’s largest coal-fired power plant and has already converted one of six units to run on biomass, rose to their highest since October 2008. The government confirmed incentives for those biomass plants would be unchanged from an earlier draft proposal.
Eggborough Power Ltd. has also progressed to the next stage in its bid for contracts guaranteeing power prices for coal units converted to run on biomass, the Energy Department said. Denmark’s Dong Energy A/S advanced with bids for three offshore wind farms.
The guaranteed price for onshore wind was cut to 95 pounds per megawatt-hour from 2015 and 90 pounds from 2017. That’s lower than draft levels proposed in June for 100 pounds and 95 pounds in those years. Support for large-scale solar farms was cut by 5 pounds in 2015, 2016 and 2017 and by 10 pounds in 2018.
“The price we’re willing to pay for onshore wind and large-scale solar plants is coming down,” said Chief Secretary to the Treasury Danny Alexander. Even so, “the need for investment in our energy sector is enormous.”
The level offshore wind will get from 2018 was raised by 5 pounds to 140 pounds.
“Today’s cuts to onshore wind and solar support schemes show how quickly the cost of clean energy technologies are falling,” Greenpeace Policy Director Doug Parr said in an e-mailed statement. “It’s right ministers should now put emphasis onto helping drive down the cost of offshore wind so that the U.K. can reap the rewards of new turbine factories and thousands of new jobs.”
The U.K., with almost 3,000 megawatts of wind turbines installed at sea at the end of 2012, has more offshore wind power than the rest of the world put together, though at present none of the turbines are made domestically.
Government spending on environmental measures has become a political focal point after five of the nation’s “Big Six” energy providers raised bills to consumers.
Ed Miliband, leader of the opposition Labour Party, pledged to freeze prices if he wins the election due in 2015. The government responded by reviewing surcharges to energy bills that pay for green and social programs, resulting in changes to energy efficiency programs announced two days ago.
The revisions also show a continued push-back against large-scale renewable projects on land.
Energy Minister Greg Barker said in July that the government planned guidelines for large-scale photovoltaic plants designed to “preserve heritage assets and beautiful countryside.” Former energy minister John Hayes last year made similar comments about onshore wind, saying more weight should be given to aesthetics when making planning decisions.
The government also in June announced higher payments to communities that host onshore wind farms, and introduced guidance for planning authorities to ensure local residents are consulted earlier about applications for the installations.
In a separate announcement, the Department of Energy and Climate Change proposed raising incentives to companies and communities that install renewable heat facilities, including biomass boilers over 1-megawatt, deep geothermal, combined heat and power plants, ground-source heat pumps, solar thermal installations and biogas burners.
“It is vital that we get the level of support right so that the market can invest with confidence, cost reductions can be achieved and the market can grow sustainably,” Barker said today in a written statement to Parliament.
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