Long-term subsidies for wind farms are to be cut by a quarter, the Government will announce this week.
The decision will delight anti-wind farm campaigners and back-bench Conservative MPs who have sought a cut to curtail the construction of turbines.
But the wind power industry said the measure would leave billions of pounds of investment and thousands of jobs “hanging in the balance” and pointed to David Cameron’s promise that his government would be the greenest ever.
Ed Davey, the Liberal Democrat Energy Secretary, will announce the cut in subsidies for new wind farms as part of a radical overhaul of the electricity market.
He will say that the subsidies, which are added on to household electricity bills and paid for by consumers, will last for 15 years rather than 20 – effectively a 25 per cent cut. The plans, which will affect all wind farms built after 2017, will be outlined in an Energy Bill now before Parliament.
At the moment, developers of onshore wind farms receive a double payment: one sum for selling electricity to the National Grid and a similar amount in the subsidy for producing renewable energy.
Offshore wind farms receive approximately double the subsidy to reflect higher building costs.
The industry has just a few years to bring down the costs or risk losing investors. The cut has angered the industry, which warned that its commitment to meet legally binding renewable energy targets by 2020 was in jeopardy.
But the Department of Energy and Climate Change said the cut would encourage the industry to come up with technological innovations to make the building and operation of turbines cheaper. The move follows a small cut in subsidy for onshore wind farms last year.
Mr Davey said: “Where technology costs fall, it’s right that we cut subsidies to protect consumer bills. We have already done this with onshore wind and solar. Now the Energy Bill will deliver an even better bang for the consumers’ buck.”
Opponents of wind farms have long argued that the subsidies, introduced by the Labour government to encourage the industry, were far too generous. The Renewable Energy Foundation (REF), a think tank critical of the wind power industry, has estimated that consumers currently pay more than £1 billion a year in subsidies, and this is expected to rise to £6 billion a year by 2020 to meet targets for providing 30 per cent of electricity through green energy.
Dr John Constable, director of REF, said: “DECC’s reduction of subsidy entitlement from 20 to 15 years is a tacit admission of two key points, firstly that current subsidies are overgenerous, and secondly that … wind turbines are in any case unlikely to have an economic life much over a decade.
“DECC needs to face up to the fact that subsidising existing renewable technologies hurts the consumer without delivering any significant benefit to climate change or creating a renewables industry that can actually stand on its own feet.”
Last year – as first reported by The Sunday Telegraph – 101 Tory backbenchers signed a letter to Mr Cameron demanding the subsidy be cut. The issue has proved a major headache for the Coalition with Liberal Democrats keen to promote wind farms while Tories railed against them. Opponents complain that they are costly, spoil the countryside and are unreliable in guaranteeing electricity supply.
The wind power industry has been keen to push turbines as a solution to securing domestic supply without reliance on gas from Russia and beyond.
It has lobbied hard to maintain subsidies and said that a push for huge wind farms offshore, which would have led to a growth in manufacturing jobs, was now in jeopardy
Maf Smith, deputy chief executive of the trade association RenewableUK, said: “The fact that financial support for wind energy projects is to be cut from 20 years to 15 years will certainly have an impact on onshore and offshore wind farms which are yet to be built.
“Imagine the shock if you were suddenly told that you will have to pay back a 20-year mortgage in just 15 years instead.”
He said the industry was still waiting for further details of the electricity market reform, which should be in place by December when the Energy Bill is due to become law.
He added: “In the meantime, billions of pounds of investment, the creation of tens of thousands of green-collar jobs and the ribbon-cutting ceremonies at big wind turbine factories in some of the most economically-deprived parts of Britain hang tantalisingly in the balance.”