www.environmental-finance.com/onlinews
London, 27 November:
The UK government is to extend its flagship renewable energy support mechanism to 2037, in a surprise move announced by the finance minister on Monday. The Renewables Obligation (RO), which requires electricity suppliers to source a growing proportion of power from renewable sources, was due to run out in 2027, putting at risk the financing of potentially 25GW of offshore wind farms.
"Renewable energy along with nuclear energy will play an increasing role in meeting our energy future," Chancellor of the Exchequer Alastair Darling told Parliament, introducing the government's pre-budget report, which gives early warning of measures to be included in the spring budget. "By requiring energy companies to generate a share of energy from renewable sources, the obligation will underpin investor confidence and support the development of renewable energy," he added.
Under the RO, renewable energy generators are granted Renewables Obligation Certificates (ROCs) for each megawatt hour of power they produce. These are sold to power suppliers, which use them to demonstrate compliance with their targets under the RO - thus providing renewable energy projects with an additional revenue stream.
The renewable energy industry welcomed the move. Maria McCaffery, chief executive of the British Wind Energy Association (BWEA) said: "BWEA has been for some time now asking the government to reiterate its commitment to the Renewables Obligation beyond 2027." She said that offshore wind projects under the UK's third round of consents are due to come on line from 2015, meaning that the RO would only cover around half of the projected lifespan of the projects. "This extension to the RO will bring long-term stability and encourage developers to continue with the building programme," she said.
Jonathan Johns, head of renewable energy at Ernst & Young, said: "This is clearly vital for the onshore wind industry where the UK has the chance of being a world beater. "It should not be forgotten that the renewal is good news for other renewables. Many governments are concluding that renewables are both good for climate change and for stimulating much needed investment in the economy.
Post recession, we need to ensure that there is a strong green-collar sector." The RO came into force in 2002, with an initial target of 3%. This is to rise to 15.4% by 2015-16, although this target is set to climb to 20% as the industry nears its obligation targets. It is likely that the government's renewable energy strategy, due to be published next spring, will increase the RO targets beyond 2016.
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