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United Kingdom

United Kingdom

Parliament attacks legislation -- Renewables obligation too costly

Too expensive, poorly targeted and inadequate to meet the country's emissions reductions targets. This is the damning verdict on the UK's green support mechanism, the Renewables Obligation (RO), by parliament's Public Accounts Committee (PAC).

PAC says the RO is four times more expensive than other means of reducing carbon dioxide currently used in the UK. "A carbon tax would be a less complex way of reducing carbon emissions," states the report. Even if renewables capacity increases as the government hopes, it will still need to boost other zero or low carbon forms of generation to meet its overall emissions target, says PAC. This will be needed to replace nuclear power stations that are due for closure.

The report draws heavily on the findings of the National Audit Office's scrutiny of renewables earlier this year. It points out that by 2010 the RO will add £1 billion a year to electricity bills and will have cost consumers at least £5 billion. Expansion of the electricity grid needed to meet the UK's 10% renewables target will cost consumers another £2 billion.

Public backlash

"Consumers are providing a massive subsidy to the renewables industry," says PAC's chairman, member of parliament Edward Leigh. "But unlike public expenditure, this subsidy does not receive annual scrutiny by parliament. This is unacceptable."

Some renewable technologies -- particularly landfill gas and onshore wind -- are receiving far more support than they need, says the report. Around a third of the support under the RO exceeds generators' needs. The PAC calls on the DTI to taper or phase out support for lower cost technologies as part of its 2005 review of the RO.

The report warns of a public backlash against onshore wind and comments that offshore turbines are less physically intrusive. It suggests the DTI should factor in this advantage when considering levels of support for onshore and offshore wind.

The accounts committee also turns its sights on the money raised from auctions of power contracted under the UK's previous support mechanism -- the Non-Fossil Fuel Obligation (NFFO). The DTI comes in for criticism for including NFFO sites in the RO. By 2010, this will unnecessarily cost consumers between £550 million and £1 billion, the report says, with the revenue from the auctions merely being used to swell Exchequer coffers.

Small price to pay

The British Wind Energy Association says the cost of the RO is well known. It works out at an average cost to consumers of £10-12 each year in 2010, rising to £15-18 by 2015. Given the recent rises in gas prices with the knock-on effect of increases in electricity tariffs, the RO will add just 5% to domestic bills, says the BWEA's Marcus Rand. "This relatively small increase in bills will also deliver a new industry, increased security of supply and significant climate benefits," he says.

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