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Over generous wind farm subsidies should be cut, says top economist

Influential Scottish economist Tony Mackay has claimed that the subsidies paid to onshore wind farms in Scotland are “unnecessarily high” and have led to “supernormal” profits for businesses and landowners.

In his July report on the state of the Scottish economy the Inverness-based economist said that the subsidies received by wind farms has on average been “between 2.5 and 3 times what was required to expand wind farm capacity to meet Scottish Government [emissions] targets”.

While other countries often subsidise capital investment for electricity generators, Mackay claims it is rare for companies to have their operating costs and revenue subsidised as has been the case for the UK’s wind energy sector for several years.

As a result, Mackay believes, electricity bills in Scotland are now around 10 per cent higher than they would be without subsidies and the UK Government is right to reduce them.

“There is little doubt that these subsidies have been very generous and led to the construction of a large number of wind farms in Scotland,” he said.

Even with the replacement of the overly generous Renewables Obligations (RO) subsidy scheme with the more limited and competitive Contracts for Difference (CfD) subsidies, the UK will still be “stuck with the current shambles of subsidies for wind energy projects,” he said.

Mackay added that he agreed with the UK government’s plans, announced last month, to scale back RO subsidies to onshore wind farms a year earlier than planned, closing from April 2016.

Mackay’s claims have been rebutted by Joss Blamire, senior policy manager of industry body Scottish Renewables, who told the Sunday Herald that subsidies paid to onshore wind in Scotland have been cut by 10 per cent in recent years and that subsidies add around 82 pence a week (or 7 per cent) to the average annual Scottish electricity bill of £597.

“The future trajectory for onshore wind through the Contracts for Difference (CfD) scheme shows significant future reductions can and will be made.”

“Both the RO and CfD mechanisms were designed to cut costs, and this is what they are doing – a process which could see onshore wind become the first renewable energy technology to reach cost parity with fossil fuel generation.”

Scottish Renewables claims that the proposed change to subsidies for onshore wind could put up to £3 billion of investment and 5,400 jobs at risk and that the plans will disproportionally affect Scotland which has around 70 per cent of the UK’s onshore wind capacity.

“It is illogical and unfair to retrospectively cut support for onshore wind, a sector which employs more than 5,000 people in Scotland and is helping us meet our climate change targets at the lowest cost to consumers of any renewable technology,” Blamire said.