The government has announced that it is to cut back on the ever increasing cost of subsidising renewable power sources which, it stated, is threatening to make household bills unaffordable.
The new policy includes eliminating the support that is currently offered for smaller scale solar schemes, a year earlier than planned, reviewing the criteria on which renewable projects are assessed for subsidies, and also changing the way that biomass plants are dealt with.
This news follows hot on the heels of the announcement that the government is to get rid of the subsidies currently available for onshore wind farms, from Spring 2016.
Data made available by the Department of Energy and Climate Change (DECC) indicates that the total cost of such renewable subsidies is likely to reach a cost of £9.1 billion per year within half a decade. This far exceeds the budgeted figure of £7.6 billion.
The government has also made it clear that it intends to implement a wholesale extensive reform of the electricity sector in the UK. It has taken steps to alter the ways in which it assists the production of renewable energy, by substituting direct grants with a CfD (‘contracts for difference’) system.
Under this new system, any project that is deemed to qualify will be given a minimum price (which the government will guarantee) at which they are permitted to sell electricity. Those companies running (renewable) power generators will be able to tender bids for ‘contract for difference’ projects, via an auction process.
The first set of auctions, which took place in December last year, led to the government awarding twenty seven contracts to renewable energy suppliers. In total, these contracts were worth over £315 million.
The government has gone on record saying that the budget for the ‘contracts for difference’ allocation would be set sometime later this year, with the second stage due towards the end of 2015.