Government postpones green energy subsidy cut by two months

LONDON (Reuters) – Britain moved back the start date of new mostly lower subsidy levels for small-scale renewable projects by two months to December 1 and said it would cut support for wind, hydro and waste power by 5 percent per year from 2014, depending on uptake.

Friday’s announcement came days after the government delayed a tariff decision for large-scale renewable projects, its Renewable Obligations programme.

It gave green energy investors some certainty about how much money they will receive for smaller projects which will start operating later this year.

Under the new feed-in tariffs (FITs), which were previously expected to start from October 1, the smallest wind farms, of 1.5 kilowatt (kW), will see support levels slashed by 41 percent to 21 pence per kilowatt-hour (kWh), reflecting a reduction in the cost to build wind farms.

The government also decided to create a new category for hydroelectric projects between 100-500 kW, giving them a nearly 30 percent boost at 15.5 pence per kWh.

“As well reducing tariffs over time for AD (anaerobic digestion), hydro and small scale wind in line with uptake, we are introducing tariff guarantees for all technologies, great news for projects with long lead in times like hydro power,” said Britain’s Energy and Climate Change Minister Greg Barker in a statement.

The minister already announced in May a delay to a planned cut in support levels for solar installations by one month to August 1, after low demand for the panels that turn light into electricity in March and April.

The uptake of solar projects in Britain has been much higher than anticipated and the government had to intervene by slashing tariffs earlier than expected to prevent its renewable energy budget running out early.

Solar FITs will be subject to a mechanism known as degression whereby subsidy levels are gradually reduced over a certain timeframe, from November this year, based on how high the uptake has been in previous months.

Friday’s review also imposed a degression process on small-scale AD, wind and hydro projects from April 2014 at a baseline of 5 percent, but which can be adjusted according to deployment to between 2.5-20 percent.

“These measures reinforce our position that, given resource pressures, tariffs above the marginal cost of meeting the UK’s renewables target can only be justified as a transitional policy to allow those technologies time to improve cost efficiency,” Barker said.

(Reporting by Karolin Schaps; Editing by Anthony Barker)

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