Conservative ministers have backed down on big cuts in subsidies for wind farms in exchange for another review next year and the prospect of a bigger role for gas in Britain’s future energy mix.
The Coalition will today announce that subsidies for onshore wind turbines will be cut by 10 per cent this year, as proposed by Ed Davey, the Liberal Democrat Energy Secretary. That will disappoint Conservative backbenchers, many of whom had called for much larger cuts in subsidy, with some Tories backing a 25 per cent reduction.
Today’s announcement, which follows negotiations between the Coalition parties, will be some relief to the renewable energy industry, which has warned that uncertainty about government support has been putting off investors.
However, more cuts could yet be made following a formal review of the costs of renewable energy to be held in the financial year 2013-14.
In another concession to George Osborne, the Chancellor, today’s statement will contain a clear commitment that “unabated” gas supplies will form a major part of Britain’s energy mix.
Mr Osborne has angered environmentalists by pushing for gas-fired power stations to produce more of Britain’s electricity. Advocates of gas say it is more reliable and cost-effective than renewable sources, but critics say it could leave the UK dangerously dependent on an imported energy source.
Mr Osborne has also opposed the imposition of any new targets for reductions in Britain’s carbon emissions, which he says are “inefficient.”
New planning laws could also make it easier for residents to oppose new wind turbines, and to receive a financial benefit from those that are built.
Because the cuts in subsidy will not exceed 10 per cent, Lib Dem ministers are likely to present the announcement as a victory for their party.
The deal has emerged as Conservative ministers look for ways to shore up the position of Nick Clegg, the Deputy Prime Minister. Senior Tories are worried that Mr Clegg could yet be toppled as party leader, threatening the Coalition.
Tim Yeo, the Tory chairman of the Commons energy committee, said a 10 per cent cut was a sensible reduction in subsidies for now.
“There is general agreement that 10 per cent is perfectly acceptable to reflect growing efficiency and falling costs of turbines,” he said. “In the long term a signal for sharper cuts post-2017 will give the industry time to adapt.”
Renewable UK, the trade group for “green” energy companies, warned that under the Electricity Act the Secretary of State was obliged to justify cuts in aid for renewable energy with economic evidence. Otherwise the Government could be open to legal action.