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United Kingdom

More detail on onshore subsidy grace period

UK: Newly released detail from the government reveals that developers seeking the Renewables Obligation (RO) subsidy and that demonstrate difficulty in securing finance will be eligible for an extended grace period to complete their projects.

The Energy Bill is currently being debated in parliament
The Energy Bill is currently being debated in parliament

The Department of Energy and Climate Change (Decc) has amended the Energy Bill, which lays out the closure of the RO subsidy for onshore projects.

While the subsidy finishes in 31 March 2016, the bill previously allowed a grace period to some projects to complete by 31 March 2017.

In a move showing the department acknowledges the harm to investor confidence from the closure of the RO, announced on 18 June 2015, Decc is extending the grace period for some projects that have since struggled to secure finance. The extension adds another nine months beyond the one year grace period to complete projects.

To be eligible for the grace period, developers must show that as of 18 June 2015 they have: received planning consent; have successfully appealed a planning refusal made on or before 18 June; and have acquired grid connection and land rights.

Extra time

"Projects that have met all these criteria and can demonstrate that they have struggled to secure finance from lenders since 18 June 2015 will be allowed extra time but no longer than nine months," Decc said.

This means that developers that meet the grace period criteria but show difficulty with financing will have until 31 December 2017 to complete the projects and receive RO support.

Decc said the additional nine months to the end of the grace period is equal to what they believe is the time between the announcement of the bill (18 June) and royal assent – when it becomes law.

"This announcement means that wind farm companies can now go ahead and fully invest in local wind farm projects. It’s good to see that Government has acknowledged the financial uncertainty caused by these changes and the additional time offered will help rebuild investor certainty," said Maf Smith, deputy CEO of RenewableUK. 

The government department believed 2.9GW of onshore wind capacity would be eligible for the grace period. 

The UK could see a "couple of gigawatts" of additional onshore capacity in the next 18 months before the Renewable Obligation subsidy is closed indefinitely, said Jonathan Cole of ScottishPower, at RenewableUK's annual conference earlier in the week.

The passage of the Energy Bill through parliament may not be completed until early 2016, perhaps just weeks before the RO is closed.

Renewable Obligation Certificates are being replaced by Contracts for Difference auctions, the first round of which has already been awarded.

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