Mixed Messages Ahead of the ROC Review

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Adam Barber
July 20, 2012
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Mixed Messages Ahead of the ROC Review

There was more uncertainty in onshore wind energy this week, following the Government’s mixed messages as to its plans to reduce the Renewable Obligation subsidy for onshore developments.

At present, the industry is still no clearer as to whether ROCs will be reduced by 10%, the level favoured by Climate Change Secretary Ed Davey, or by higher levels, allegedly being pushed for by the Treasury.

Rumours abound that we may hear the final decision during the Olympics, conveniently whilst Parliament is in recess.

Given the delay, there’s clearly some wrangling going on.

But with the recent revolt by 100 backbench Tory MPs over onshore wind, and the danger that this poses to tearing apart the wider coalition, our money is on the rate cut being at a higher level.

The question then, is to what extent this cut will slow wind energy production.

CBI Director General John Cridland stepped into the debate to warn that drastically cutting green subsidies would undoubtedly threaten jobs and growth.

And for the fund community, particularly the more activist elements, onshore wind will probably cease to be of interest as an asset class. The exception may be pension funds, which can afford lower returns over a longer period.

In recent years onshore wind has certainly proliferated, but despite certain large projects being given the go-ahead, there are some challenges in the market that seem to be slowing the impetus before the ROC reduction was even discussed.

Planning complications, grid connections and site accessibility have conspired in some cases to make councils think twice before granting permission to particular projects.

So coupled with the ROC reduction, DECC targets of onshore wind growth rates of 13% a year seem unlikely.

Which, really, should spark a debate as to what onshore wind energy can now realistically deliver to the renewable energy mix. That inexorably leads to more questions as to overall green energy policy and which other renewable sources need to be expedited to make up the shortfall.

Ultimately, the subsidy cut won’t stop the industry in its tracks, and it may even encourage cost cutting in some processes.

Additionally, in the short term, it will force developers to ensure that they only scope the best projects with strong wind profiles.

Long-term though, and given the relatively slow pace of offshore wind developments, the Government has some difficult questions to answer as to how it hopes to reach 18GW of wind energy supply by 2020.

There was more uncertainty in onshore wind energy this week, following the Government’s mixed messages as to its plans to reduce the Renewable Obligation subsidy for onshore developments.

At present, the industry is still no clearer as to whether ROCs will be reduced by 10%, the level favoured by Climate Change Secretary Ed Davey, or by higher levels, allegedly being pushed for by the Treasury.

Rumours abound that we may hear the final decision during the Olympics, conveniently whilst Parliament is in recess.

Given the delay, there’s clearly some wrangling going on.

But with the recent revolt by 100 backbench Tory MPs over onshore wind, and the danger that this poses to tearing apart the wider coalition, our money is on the rate cut being at a higher level.

The question then, is to what extent this cut will slow wind energy production.

CBI Director General John Cridland stepped into the debate to warn that drastically cutting green subsidies would undoubtedly threaten jobs and growth.

And for the fund community, particularly the more activist elements, onshore wind will probably cease to be of interest as an asset class. The exception may be pension funds, which can afford lower returns over a longer period.

In recent years onshore wind has certainly proliferated, but despite certain large projects being given the go-ahead, there are some challenges in the market that seem to be slowing the impetus before the ROC reduction was even discussed.

Planning complications, grid connections and site accessibility have conspired in some cases to make councils think twice before granting permission to particular projects.

So coupled with the ROC reduction, DECC targets of onshore wind growth rates of 13% a year seem unlikely.

Which, really, should spark a debate as to what onshore wind energy can now realistically deliver to the renewable energy mix. That inexorably leads to more questions as to overall green energy policy and which other renewable sources need to be expedited to make up the shortfall.

Ultimately, the subsidy cut won’t stop the industry in its tracks, and it may even encourage cost cutting in some processes.

Additionally, in the short term, it will force developers to ensure that they only scope the best projects with strong wind profiles.

Long-term though, and given the relatively slow pace of offshore wind developments, the Government has some difficult questions to answer as to how it hopes to reach 18GW of wind energy supply by 2020.

There was more uncertainty in onshore wind energy this week, following the Government’s mixed messages as to its plans to reduce the Renewable Obligation subsidy for onshore developments.

At present, the industry is still no clearer as to whether ROCs will be reduced by 10%, the level favoured by Climate Change Secretary Ed Davey, or by higher levels, allegedly being pushed for by the Treasury.

Rumours abound that we may hear the final decision during the Olympics, conveniently whilst Parliament is in recess.

Given the delay, there’s clearly some wrangling going on.

But with the recent revolt by 100 backbench Tory MPs over onshore wind, and the danger that this poses to tearing apart the wider coalition, our money is on the rate cut being at a higher level.

The question then, is to what extent this cut will slow wind energy production.

CBI Director General John Cridland stepped into the debate to warn that drastically cutting green subsidies would undoubtedly threaten jobs and growth.

And for the fund community, particularly the more activist elements, onshore wind will probably cease to be of interest as an asset class. The exception may be pension funds, which can afford lower returns over a longer period.

In recent years onshore wind has certainly proliferated, but despite certain large projects being given the go-ahead, there are some challenges in the market that seem to be slowing the impetus before the ROC reduction was even discussed.

Planning complications, grid connections and site accessibility have conspired in some cases to make councils think twice before granting permission to particular projects.

So coupled with the ROC reduction, DECC targets of onshore wind growth rates of 13% a year seem unlikely.

Which, really, should spark a debate as to what onshore wind energy can now realistically deliver to the renewable energy mix. That inexorably leads to more questions as to overall green energy policy and which other renewable sources need to be expedited to make up the shortfall.

Ultimately, the subsidy cut won’t stop the industry in its tracks, and it may even encourage cost cutting in some processes.

Additionally, in the short term, it will force developers to ensure that they only scope the best projects with strong wind profiles.

Long-term though, and given the relatively slow pace of offshore wind developments, the Government has some difficult questions to answer as to how it hopes to reach 18GW of wind energy supply by 2020.

There was more uncertainty in onshore wind energy this week, following the Government’s mixed messages as to its plans to reduce the Renewable Obligation subsidy for onshore developments.

At present, the industry is still no clearer as to whether ROCs will be reduced by 10%, the level favoured by Climate Change Secretary Ed Davey, or by higher levels, allegedly being pushed for by the Treasury.

Rumours abound that we may hear the final decision during the Olympics, conveniently whilst Parliament is in recess.

Given the delay, there’s clearly some wrangling going on.

But with the recent revolt by 100 backbench Tory MPs over onshore wind, and the danger that this poses to tearing apart the wider coalition, our money is on the rate cut being at a higher level.

The question then, is to what extent this cut will slow wind energy production.

CBI Director General John Cridland stepped into the debate to warn that drastically cutting green subsidies would undoubtedly threaten jobs and growth.

And for the fund community, particularly the more activist elements, onshore wind will probably cease to be of interest as an asset class. The exception may be pension funds, which can afford lower returns over a longer period.

In recent years onshore wind has certainly proliferated, but despite certain large projects being given the go-ahead, there are some challenges in the market that seem to be slowing the impetus before the ROC reduction was even discussed.

Planning complications, grid connections and site accessibility have conspired in some cases to make councils think twice before granting permission to particular projects.

So coupled with the ROC reduction, DECC targets of onshore wind growth rates of 13% a year seem unlikely.

Which, really, should spark a debate as to what onshore wind energy can now realistically deliver to the renewable energy mix. That inexorably leads to more questions as to overall green energy policy and which other renewable sources need to be expedited to make up the shortfall.

Ultimately, the subsidy cut won’t stop the industry in its tracks, and it may even encourage cost cutting in some processes.

Additionally, in the short term, it will force developers to ensure that they only scope the best projects with strong wind profiles.

Long-term though, and given the relatively slow pace of offshore wind developments, the Government has some difficult questions to answer as to how it hopes to reach 18GW of wind energy supply by 2020.

There was more uncertainty in onshore wind energy this week, following the Government’s mixed messages as to its plans to reduce the Renewable Obligation subsidy for onshore developments.

At present, the industry is still no clearer as to whether ROCs will be reduced by 10%, the level favoured by Climate Change Secretary Ed Davey, or by higher levels, allegedly being pushed for by the Treasury.

Rumours abound that we may hear the final decision during the Olympics, conveniently whilst Parliament is in recess.

Given the delay, there’s clearly some wrangling going on.

But with the recent revolt by 100 backbench Tory MPs over onshore wind, and the danger that this poses to tearing apart the wider coalition, our money is on the rate cut being at a higher level.

The question then, is to what extent this cut will slow wind energy production.

CBI Director General John Cridland stepped into the debate to warn that drastically cutting green subsidies would undoubtedly threaten jobs and growth.

And for the fund community, particularly the more activist elements, onshore wind will probably cease to be of interest as an asset class. The exception may be pension funds, which can afford lower returns over a longer period.

In recent years onshore wind has certainly proliferated, but despite certain large projects being given the go-ahead, there are some challenges in the market that seem to be slowing the impetus before the ROC reduction was even discussed.

Planning complications, grid connections and site accessibility have conspired in some cases to make councils think twice before granting permission to particular projects.

So coupled with the ROC reduction, DECC targets of onshore wind growth rates of 13% a year seem unlikely.

Which, really, should spark a debate as to what onshore wind energy can now realistically deliver to the renewable energy mix. That inexorably leads to more questions as to overall green energy policy and which other renewable sources need to be expedited to make up the shortfall.

Ultimately, the subsidy cut won’t stop the industry in its tracks, and it may even encourage cost cutting in some processes.

Additionally, in the short term, it will force developers to ensure that they only scope the best projects with strong wind profiles.

Long-term though, and given the relatively slow pace of offshore wind developments, the Government has some difficult questions to answer as to how it hopes to reach 18GW of wind energy supply by 2020.

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