July 25, 2012 / 6:27 AM / 5 years ago

UK cuts subsidies for onshore wind 10 percent from 2013

LONDON (Reuters) - The UK government on Wednesday stuck to a 10 percent reduction in subsidies for onshore wind farms, but reduced support for generating electricity from co-firing biomass which it first proposed in October 2011.

Investors in wind farms had expected a steep revision in subsidies for onshore wind from next year, after a decision on final cuts had been delayed since the spring.

The government has an ambitious programme for building onshore and offshore wind farms in Britain, with projects on land expected at a capacity of around 13 gigawatts (GW) by 2020, up from 5 GW currently in operation, in a bid to help it meet legally-binding emissions reduction targets.

"The support we're setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues and shows the key role of renewables for our energy security," said Edward Davey, Secretary of State of Energy and Climate Change.

Onshore wind farms will receive 0.9 Renewable Obligations Certificates (ROCs) per megawatt-hour generated from 2013-17, instead of 1 ROC currently given, but the level could be reduced again from April 2014 if there is a significant change in generation costs, the government said.

ROCs are subsidies paid to renewable energy producers by the government at a buy-out value of 40.71 pounds per ROC for the 2012-13 period.

The government was due to announce final subsidy cuts from April 2013 for renewable energy projects above 50 kilowatts (kW) in capacity in the spring after a consultation on new subsidy levels closed in January, but a delay had spread speculation that amendments would be made.

Instead of expected cuts to wind power projects, the government reduced a generous increase in subsidies for enhanced biomass co-firing first announced in October, even though levels from April 2013 will still be higher than what operators can currently bank on.

Projects firing 50-84 percent of biomass next to fuels such as coal to produce electricity will now receive 0.6 ROCs from next year, compared with 1 ROC proposed in October, but still 20 percent higher than current levels at 0.5 ROCs.

Offshore wind subsidies will also be cut in line with onshore wind support reductions as the cost of building either technology has dropped in recent years.

Offshore wind farm subsidies will fall 5 percent in 2015/16 to 1.9 ROCs and a 10 percent cut to 1.8 ROCs will take place in 2016/17, the government said.

The government also maintained a subsidy level proposal that is more than double the current rate for tidal stream and wave power projects.

Installations up to 30 MW will receive 5 ROCs from next year, compared with 2 ROCs currently awarded.

The government said that until 2017 the proposed subsidies could add another 79 terawatt-hour (TWh) of renewable energy production per year, around 74 percent needed for Britain's 2020 green energy target.

Editing by David Holmes and Alison Birrane

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