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Crucial renewable energy subsidy decision could be delayed

Unresolved row over wind farm subsidies has forced ministers to delay decision until the autumn, according to reports

The government has reportedly delayed a crucial decision on the level of subsidy for wind farms and other forms of renewable energy, after ministers failed to resolve a stand-off between the Chancellor George Osborne and senior Liberal Democrats.

An announcement on the level of support renewable energy projects can expect to receive through the Renewables Obligation Certification (ROC) subsidy mechanism through to 2017 had been expected today with ministers repeatedly stressing that they wanted to confirm the level of support before the summer’s parliamentary recess.

Renewable energy developers have complained that millions of pounds of investment is currently on hold as a result of the lack of clarity over the returns they can expect.

But according to reports in both the Telegraph and the Financial Times the crucial decision has been delayed until the autumn amidst on-going disagreements at the top of the coalition over the level of support that should be made available to onshore wind farms.

The Financial Times reported that Osborne has refused to approve DECC’s original plan to cut support for onshore wind farms by just 10 per cent, although the paper also claimed the Chancellor is not pushing for cuts as deep as 25 per cent as had been previously reported.

However, the Telegraph reported that the row over subsidies had not split evenly along party lines, claiming Energy and Climate Change Secretary Ed Davey had agreed to a “complex package” of support that could have featured deeper cuts to ROC subsidies, but would also have entailed community grants designed to encourage wind farm developments in some areas. But Lib Dem leader Nick Clegg is said to have blocked the plan, insisting that deeper cuts to subsidies were not justified.

The delay will be seen as a victory for those backbench Tory MPs who have been waging a vocal campaign against onshore wind farms and have called for subsidies for the sector to be slashed.

A Conservative Party source told the Telegraph that the party was “prepared to play this long”, adding that “energy policy is absolutely critical and the Chancellor was not happy with what was ultimately on the table”.

However, the delay is likely to be met with fierce condemnation by green and business groups, both of which have warned continued policy uncertainty has stalled renewable energy projects that could have created jobs and cut carbon emissions, while also driving up the cost of capital for developers.

The wind industry has warned that planned projects will not be able to move forward if the government opts for a deep package of cuts, while developers in the biomass, combined heat and power, anaerobic digestion, marine, and solar sectors are similarly furious that they are yet to see levels of support confirmed. However, it remains to be seen if an announcement on less contentious changes to subsidies to non-wind energy projects could be confirmed at an earlier date. 

CBI director-general John Cridland declared last week that he would like to see the government move forward with DECC’s original plan for modest cuts to subsidies, arguing that it would help to drive green growth and create jobs.

Experts have also warned that deep cuts to subsidies for onshore wind farms would force the UK to increase its reliance on more costly forms of renewable energy such as offshore wind if it is to meet its legally binding EU renewable energy targets.

Ministers are now expected to attempt to thrash out an alternative compromise deal that can be agreed in the autumn.

DECC was unable to comment at the time of going to press.