We can still hear the long sigh of relief after the UK Government announced two new longer-term incentives for sustainable power generation in the UK, in the Queen’s Speech. Earlier this month it was rumoured that the proposed Electricity Market Reform (EMR) would be delayed to free up parliamentary time for the House of Lords Reform.
The good news for green technology providers is a new ‘Contracts for Difference’ Feed-In Tariff (FiT), which would help to avoid future stampedes, similar to that experienced when the Government slashed the FiTs for solar PV last year, a move that prompted protracted legal action and led to the stalling of many renewable projects on these shores. First announced by the UK's Department of Energy and Climate Change (DECC) in small print in the EMR White Paper last year - and unveiled in Parliament last week - the Government hopes that the new incentive will provide stability for investors.
This would stretch from small scale developments to larger energy plants, as part of plans to offset the mothballing of almost one quarter of the UK's generating capacity in the next 10 years.
The EMR will also include the grandfathering of Emissions Performance Standards (EPS), something that will reduce uncertainty for large scale utilities. Gas plants will increasingly be needed for back up generation and the EMR laid out that government will guarantee the level of the EPS. The government hope this will provide certainty for investment in new plants. The regulator OFGEM will be looking into changing the balancing mechanism, which it is hoped will encourage new plants.
The Government also unveiled its intention to develop legislation for a Green Investment Bank (GIB) with the ability to loan millions of pounds to companies and organisations looking to develop renewable power plant in the future. The details of this legislation are yet to be finalised, but it would fall under the auspices of the Department for Business, rather than DECC.
The Government is making more than £110 billion pounds available through these incentives to replace mothballed carbon-hungry plants with greener and lower emission technologies. This is all very encouraging for the renewable industry, which must take its rightful place in the broader energy mix for the UK in order to reduce CO2 in line with ambitious Government targets and maintain the integrity of supply, while also controlling energy of costs.
The devil will be in the detail of both the FiT and the GIB, but we are keen to understand the eligibility criteria of both. They must be straightforward and not onerous on businesses in terms of red tape, if they are to encourage take-up.
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