Saturday, 20 October 2018

Renewables lobbies fight to stave off Treasury massacre

UK Renewable trade associations are fighting for the survival of the renewable industry against an onslaught led by the Treasury. If the Treasury gets its way almost all future development for renewable energy in the UK will be stopped. Continued incentives and tax breaks for nuclear power, shale gas and conventional power stations will, however, remain in place.

The Treasury is pushing for:

a) An end to the policy of issuing CfDs as part of the scheduled review of electricity market reform which takes place next year. This will leave next year's auction for long term power purchase agreements giving set prices to be paid for developers (contracts for difference - CfDs) as being the last. Although it is expected that a substantial amount of capacity will be awarded to offshore wind developers next year onshore wind and onshore solar projects are not allowed to compete in these auctions. The only exception will be Scottish island inshore wind schemes, a minority of which will actually be built because of the cost of connecting them to the mainland. But the Treasury want all CfD auctions (offshore wind included) to be scrapped after 2019. This would be the biggest act of demolition of the renewables expansion programme of course, but other cuts are said to be discussed including:

b) The ending of all incentives to solar pv, including for solar power exported to the electricity distribution system. Domestic solar generators will receive nothing for this energy in future under plans preferred by the Treasury. This will be a unique humiliation for solar generators who will be the only class of generators in the country who will not be paid for the electricity they send into the grid. It will also  be humiliating in international terms. Even the most conservative US states have rules which mean that solar pv generators must receive basic levels of payment for their exported energy.

c) The ending of the carbon price floor which makes fossil fuel more expensive and non-fossil sources relatively cheaper. The Treasury is considering replacing this with an increase in the climate change levy. This raises the price of energy for larger energy users but since 2015 has been levied on energy from renewables as well as other sources. Getting rid of the carbon price floor would shift the balance in electricity generation towards coal and away from non-fossil fuels.

Meanwhile the Minister for Energy Claire Perry is said to be arguing against the Treasury's atavistic tendencies. She has even been arguing for months that CfDs might be offered to onshore wind in the future, although there is absolutely no sign of this happening in terms of Government instruments. I do not doubt her intentions, but alas she seems to be fulfilling, in practice, a role of putting a green facade on Government policies which are heading back towards conventional energy sources. As a minister of state she has little influence on her own, and even if Greg Clarke, her Secretary of State were to wade in to give her more public support (so far he hasn't stirred much), the attitudes of the Treasury still have to be overcome. The Treasury continues to support the preference being given to conventional energy sources.

The incentives offered for Hinkley C are very high - and even more Government guarantees are being discusssed for the Wylfa nuclear project. Meanwhile conventional power plant can bid for annual rounds of 'capacity mechansim' payments, a facility which suits conventional power plant much better than variable renewables. On top of this shale gas entrepreneurs are being offered generous tax breaks not available to renewable energy developers.

Some references:

Many windfarms given contracts in recent auctions are also 'subsidy free' on the same basis, with average prices ranging from 47 euros/MWh to 61 euros per MWh. See

The Government talks vaguely of 'refinements' being made to the CfD round in 2021. Some see hope for allowing bids from onshore solar and wind, but others are very sceptical.

Friday, 12 October 2018

Green surge in Bavaria puts AfD in the shade

The Green Party has surged in the polls to 19%, potentially depriving the CSU of their state Parliamentary majority. They are putting the AfD in the shade who are polling a mere 10 per cent in the latest survey. The CSU is polling on 34 per cent. The state elections in Bavaria occur on Sunday 14th October. The Greens' standing in second place in the polls put them in a prime position to enter a coalition, either with the CSU themselves, or a multi-party coalition which excludes both the CSU and the AfD.

To Brits of course, who live in a parallel reality where the far right sweeps all before them and the EU is perpetually about to split up, this is not news. It hasn't been reported. We heard earlier in the year (in the British press) about how Horst Seehofer, the Federal Interior Minister, had threatened to close the Bavarian border in a policy duel with Angela Merkel in a drive to stem the rise of the AfD. But now we hear absolutely nothing about the rise of the Greens in the polls. In fact the Greens have been leading the opinion polls in Bavaria for the last 3 months, yet still this fact is routinely airbrushed from the news.

Take the Daily Express which reports on how the CSU is about to lose its majority in the state Parlaiment but which fails to mention the Greens but does mention the CSU's fear of losing ground to the AfD. To the extent that the CSU has 'toughened' its anti-immigrant rhetoric, a bigger trend in Bavaria recently has been that the CSU appears to have lost votes to the Greens (Die Grunen).

Of course, nationally, the AfD has gained ground in the last year, but reality again is much more complex than the British want to hear. In fact, far from being the unrivalled second place party that you hear in the press, it is fighting with both the SPD and the Greens for second place, these three parties polling in the 15-20 per cent range.

Green gains in Bavaria in particular are likely to positively enhance the drive for renewable energy and energy conservation of course. In particular the Greens may be able to water down the strict rules on building windfarms which are in place in Bavaria. This has meant that there are few windfarms in Bavaria compared to the rest of Germany.