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Cutting subsidies for onshore wind could cost £90million, says think tank

UK: A right-wing policy think tank has called on the UK government to reconsider plans to end support for onshore wind, which could add up to £90 million (€123 million) to consumers' bills each year.

Policy Exchange argues support for onshore wind should continue (pic: Force 9 Energy)
Policy Exchange argues support for onshore wind should continue (pic: Force 9 Energy)

Policy Exchange said onshore wind projects should remain part of the contracts for difference (CfD) auctions as it is the cheapest form of new low-carbon energy.

"A moratorium on onshore wind is likely to lead to a higher cost to consumers of meeting decarbonisation objectives. For example, replacing 1GW of onshore wind with the equivalent amount of power from offshore wind would increase the cost to consumers by £75–90 million each year," the report said.

The new Conservative government has announced plans to end renewables obligation (RO) support for onshore wind by April 2016, a year earlier than planned. The government has also hinted it would prevent onshore wind projects from entering the next CfD auction, the support mechanism replacing the outgoing renewables obligation.

The report argued that onshore wind could be cost comparable with new gas generation by 2020 provided continued support is given to the sector, and all cost reduction opportunities are explored.

Policy Exchange also said onshore wind could effectively become "subsidy-free" under the CfD system. "Our analysis shows that onshore wind could approach the cost of new-build gas generation by 2020 or shortly thereafter, at which point a CfD contract should no longer been seen as a 'subsidy' as gas generation also receives subsidies."

In its recommendations to the government, the report suggests the CfD strike prices should be lowered to cap the amount payable to new and repowered onshore wind projects: "The cap should taper downwards to achieve a reduction in subsidies to onshore wind, whilst also recognising that fossil-fuel generators (such as gas) also receive subsidy payments."

In July, Policy Exchange slammed the government, calling the UK's management of subsidies "reckless and wasteful".

Policy Exchange has also called on the government to fast-track the 2015-16 energy bill, which legislates the closure of the RO a year earlier than expected to reduce uncertainty for developers. An early draft of the bill was missing key detail about the closure of the scheme.

You can read the full Policy Exchange report here.

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