Investment may begin to stall for the renewables industry after the announcement of changes to the FiT. Even before the cuts are due to be implemented in January next year, damage is already being done to our ability to go green on a large scale.
When the Government and DECC announced proposed changes to the FiT subsidy recently, many insiders voiced their opinion that it will cause severe damage to the renewables industry. At best, it could see a dramatic slowing down of much needed investment and the possibility that some major players will begin to seriously reconsider their positions. At worst, it may cause such uncertainty that the green energy cause will be pushed back and crippled for many years to come.
It didn’t take long for things to start happening in the industry when the news was first announced at the end of August.
Drax and Carbon Capture
In Selby in Yorkshire, one of the biggest coal-fired power stations in the country has been the scene of quite a lot of investment and innovation over the last few years. Owned by Drax, developments have been ongoing to capture carbon dioxide produced by the plant and send it out to the North Sea.
This ambitious, £1 billion project may now be put on the back burner because the Government has removed tax exemptions. The day the policy change was announced, Drax saw their share price drop and it caused them to quickly reconsider whether they are going to proceed with the project.
Towards the end of September, Drax published a press release on their website:
“We are confident the technology we have developed has real potential, but have reluctantly taken a decision not to invest any further in the development of this project. The decision is based purely on a drastically different financial and regulatory environment and we must put the interests of the business and our shareholders first.”
Swansea Tidal Lagoon
We reported not too long ago on the investment going into one of the biggest renewable projects the UK has ever seen with the Swansea Tidal Lagoon. Initial investment in the project has been good with many companies coming on board to help finance what could be the first real large scale innovation to harness the power of our coastline to produce clean, renewable energy.
The problem is that investment depends on the investors getting a return on their money and the changes to subsidies or the uncertainty of them may cause them to lose their nerve and back out. This hasn’t happened yet with the Swansea Tidal Lagoon but the start date has been delayed and the completion moved back two years as the project waits to see what kind of subsidy they can expect.
The delay has caused some considerable frustration in the region despite MP Byron Davies stating:
“When such huge sums of money are involved, it is incumbent on everyone to ensure that the taxpayers, who will be buying the electricity produced, get value for money. Everybody, from David Cameron and George Osborne down, are totally behind this exciting project, which will be a world first for Swansea.”
The Future of Investment in Renewables
With two of the biggest projects in the UK suddenly exhibiting ‘cold feet’ the question remains how many others are going to be affected by changes in subsidies such as the Feed in Tariff. If investors aren’t sure of their return then why, indeed, would they want to put their money into new projects?
The truth is that subsidies aren’t just about making it easier for green energy to thrive in the UK, they are a vital part of the incentive to get businesses to invest. Without that initial investment, the industry will struggle to innovate and grow and the prospect of a lower carbon economy, that is less dependent on fossil fuels and nuclear energy, becomes less likely.
How precarious it can be for businesses was highlighted this week when one of the country’s top solar panel installers filed for administration with the loss of almost a thousand jobs. Admittedly the company was encountering problems but it had a turnaround plan to get things moving again and this had already been implemented. Unfortunately, proposed changes to the FiT announced in August suddenly meant that their recovery plan was not going to work.
A spokesman for the Mark Group commented:
“The turnaround plan, which was already under way, focuses on solar PV, but the government’s recent policy announcements mean this is no longer viable.”
BREAKING NEWS: Within a few hours of news that the Mark Group was going into administration, another solar company, Climate Energy, has gone bust with the loss of 100 jobs.
There is no doubt that even before the measures of reducing the Feed in Tariff have been introduced, the simple announcement of the policy has already caused damage to the renewables industry. It could be approaching much stormier waters in January if the cuts go through and more investors start pulling the plug on green energy.
By Stephen M.