Photographer: Simon Dawson/Bloomberg

U.K. Plans to Double Penalties for Failed Clean Energy Projects

  • Plans to increase exclusion from future auctions to 2 years
  • Aim to discourage bidders for projects that may not get built

The U.K. government is planning to double the penalty for clean energy projects that fail to progress quickly enough, an effort to discourage companies from entering subsidy auctions with projects that may not get built.

Planned renewable energy projects that fail to meet key milestones defined by subsidy deals will have their contracts terminated and be excluded for two years from entering future auctions, according to proposals by the Department of Energy and Climate Change Thursday. Currently, bidders can be barred for 13 months.

The issue of failed subsidy contracts was thrust into the spotlight this month, when Mainstream Renewable Power Ltd. had its contract terminated for the planned $2.8 billion Neart na Gaoithe offshore wind farm. It failed to reach financial close by the end of March -- a key delivery milestone for the contract for difference it was awarded in 2014.

Mainstream is disputing the termination notice, arguing it couldn’t reach financial close while the project is subjected to a judicial review brought by the Royal Society for the Protection of Birds.

The proposals reflect the fact that the government plans to hold fewer auctions than originally expected, according to the consultation document. 

“As, in future, allocation rounds may occur at a different tempo than annually, the 13 month exclusion period is less likely to be effective,” it said. Responses to the consultation the government is conducting about its plans are due by June 22.

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