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Subsidies move from wind to water as tide turns on renewable energy

Energy companies have given warning that the Scottish Government could endanger the future of offshore wind projects by reducing subsidies.

SNP energy minister Fergus Ewing unveiled the Scottish Government’s blueprint for future subsidies yesterday, which includes ending support for biomass plants, and increasing support for tidal renewables. Electricity suppliers have to provide an increasing share of power from renewable sources, and different numbers of Renewable Obligation Certificates (ROCs) are awarded for different types of renewable energy generation.

The proposals, which will go out to consultation, include plans to reduce wind subsidies, taking onshore support down from one ROC per megawatt hour to 0.9, and reducing offshore wind from two ROCs to 1.8 by 2017-18. This means energy companies would have to produce more energy from these sources to meet the obligations.

Sources in the energy industry told The Scotsman that while onshore wind projects do not need subsidies as much because it is “a more mature technology”, offshore wind technology is still developing, which makes it harder to attract investment.

Labour set a high rate of subsidy for offshore to try to attract more investment from international markets, but Lib Dem Westminster Energy Secretary Chris Huhne this week announced a reversal of the policy and yesterday’s document by the Scottish Government indicated that it would follow suit.

The UK has the world’s biggest potential offshore wind market, with up to 36,000 sites identified, but energy companies queried whether this would be enough to attract investment.

Mr Ewing said he would be willing to listen to alternative views on subsidies. However, he focused on the move to cap subsidies on biomass projects, concentrating on small-scale, “more efficient” projects and removing them from large-scale ones such as the Scottish and Southern Electricity (SSE) plant near Lockerbie.

More money would then be put into supporting tidal energy, with the Scottish Government hoping to make Scotland the “Saudi Arabia” of wave technology. The increase in tidal takes it from three ROCs to five.

Mr Ewing said: “Scotland’s renewable resources are unparalleled. The changes proposed in this consultation will help make sure we continue to make the most of this valuable potential.

“While the Scottish Government supports the deployment of woody biomass in heat-only or combined heat-and-power plants, UK ambitions for large-scale, electricity-only woody biomass plants are an inefficient use of a finite resource. We have serious concerns around the sustainability of supply.”

The move on biomass was welcomed by campaigners opposing a proposed plant in Leith.

Energy companies welcomed the long-term certainty provided by the subsidy framework. An SSE spokesman said: “By continuing to support renewables now, government will allow industry to focus on further driving the costs of these technologies down.” ScottishPower said that the extra subsidy for tidal energy was helpful.

Renewable Obligations were introduced in 2002 to encourage generation of renewable energy. They oblige suppliers to source an increasing proportion of electricity from renewable sources. In 2010-11 it is 11.1 per cent.

Suppliers meet their obligations by presenting Renewables Obligation Certificates (ROCs), earned through sourcing from renewables such as wind, wave, solar or biomass. Where suppliers do not have sufficient ROCs to cover their obligation, a fine is imposed. The payment is set at a fixed price per MWh shortfall and adjusted in line with inflation.