Government "blows" renewables budget
3 Oct 2014
The government was today criticised for allocating 58% of its renewable energy budget to just eight projects, including three biomass schemes.
The House of Commons’ Public Accounts Committee (PAC) today issued a report attacking the Department of Energy and Climate Change (DECC) for a series of failures to secure “best value among consumers”.
Chief among these failures was DECC committing a potential £4 billion of its estimated £6.9 billion budget for renewable energy price support to just eight projects in April.
The Department has severely constrained the amount available to be awarded under new arrangements through price competition
PAC report
These projects, with a potential combined generating capacity of 4.5GW, comprise five offshore wind farms and three biomass plants: MGT Power’s Teeside Renewable Energy 299MW biomass combined heat and power (CHP) plant; the conversion of coal-fired units totalling 420MW at Lynemouth power station in Northumberland; and the conversion of a 645MW coal-fired unit at Drax to biomass.
They were awarded price support contracts early under the government’s new Contracts for Difference (CfD) scheme, under which renewable energy generators will receive a top-up payment when the wholesale electricity price is below a pre-agreed “strike price”, and pay money back when the price rises above it.
At the time DECC said the early award of these contracts was necessary to maintain investor confidence in UK renewables, ahead of a competition where projects will bid to secure CfD funding that starts in December.
However, the PAC report says: “In committing 58% of the total funds available for renewable contracts under these transitional arrangements, the Department has severely constrained the amount available to be awarded under new arrangements through price competition, reducing the opportunity to test the market and secure the best value for consumers. Under the terms of these contracts the Department failed to defend consumers’ interest.”
The report also criticises DECC for awarding five of the early projects to offshore wind farms, noting that this seems to have come at the expense of coal to biomass conversion plants, which have been excluded by the government from December’s CfD competition, even after yesterday’s announcement of a funding increase.
“It is not clear why the Department awarded so many early contracts to offshore wind projects, when offshore wind is currently the most expensive technology to support and other cheaper technologies could be deployed instead,” says the report.
“Its early decisions have pre-empted resources and constrained future choices. For example, biomass conversion of coal plants could be an effective way of delivering energy until the next generation of nuclear energy joins the grid.”
