Britain’s government is putting an abrupt end to renewable energy subsidies and in turn the move could potentially kill off the sector.
Dale Vince, the boss of the world’s first green energy company Ecotricity, told Business Insider exactly why he is not only not surprised that the Conservative-led government decided pull out of one of the most burgeoning developing sectors for Britain and the rest of the world but also how the country is now “embarrassing” for its lack of renewable energy support.
“Subsidies are not being phased out, they are being stopped — it’s premature and suddenly,” said Vince, who founded Ecotricity in 1995, which uses wind and sun parks to supply over 170,000 customers in Britain, in an interview with Business Insider. “I think it is a deliberate move to put the brakes on as renewable energy is now affecting competition and not in the way that favours fossil fuels.”
“The government is rigging the energy markets in favour of fossil fuels and nuclear energy. The energy sector is an incredible mess and taxpayers are footing the bill for the amount of money the government is just throwing at oil and gas at the moment.”
The International Monetary Fund revealed earlier this year that fossil fuel companies benefit from $US5.3 trillion (£3.4 trillion) a year in global subsidies. This is equivalent to $US168,000 a second, $US10 million a minute and $US600 million per hour. The IMF then showed that Britain’s fossil fuel industry siphoned seven times more in subsidies than the renewable energy industry. This is equivalent to £400 per head of population, compared to £100 per head per year for subsidising renewable energy.
This week, the government is expected to sign off on nearly £500 million more in
subsidies for highly polluting diesel generators in order to sate demand and close the gap on power supply.
“Renewable energy is cheaper for the consumer, sustainable, and is really starting to cause problems for the fossil fuel sector — especially with the cost of oil falling so dramatically,” said Vince. Oil prices have dropped from triple digit highs of summer 2014 to around $US50 per barrel as of today.
“It’s bad news for fossil fuels and the government is throwing money at them, whereas renewable energy isn’t affected about these massive [market] moves at all. Renewable energy isn’t just on the utility scale, people can put solar panels on their roofs for power. Renewable energy is radical and gives more power to consumers too and the government doesn’t like that.”
Renewable energy, especially wind power, is growing in the UK. Here are the latest stats from industry body RenewableUK:
Britain is bound under European Union law to produce 15% of its energy from renewable sources by 2020. In February, the then-coalition government, made up of the Conservatives and the Liberal Democrats, said it was on track to hit this target.
The Conservatives then won the General Election in May this year which brought an end to its coalition with the more green-friendly Lib Dems. As soon as the Tories came to power, the government took swift steps to phase out renewable energy subsidies altogether. The pivotal steps include radically changing planning laws and cancelling access to onshore wind subsidies, which has shaken the industry to the core.
Ross McArthur, managing director and head of renewable energy at the infrastructure group John Laing said last month that the UK’s coalition government completed or approved only 14 repowering energy projects, the types that are meant to update the infrastructure of existing energy projects, since 2010 but now, with the Tories in power, they are all “more or less gone.”
“Prime Minister David Cameron is going to the world leaders’ climate change conference this week and will have to have to explain how Britain is rying to fight global warming. God only know what he’s going to say as he’s the master of spin. He’s like King Cnut,” said Vince, referring to the 11th century King of Denmark who is mainly referred to popular culture as a deluded monarch believing he had supernatural powers.
“It’s embarrassing that Britain is at the bottom of the European league table for renewable energy, along with Malta and Luxembourg. Everyone knew the Tories were capable of this [completely stopping subsidies to make it harder for renewable energy companies to grow]. Especially without the Lib Dems putting a brake on them. The government said it will hit its target. But it’s not interested in make renewable energy a bigger part of Britain’s energy complex. “
Ecotricity is in a different league to a lot of newer renewable energy companies as it is more established and able to raise a large amount of funds from issuing bonds — all of which have been oversubscribed. It launched two £10 million ecobonds, one in 2010 and another in 2011, to help finance the building of a hybrid solar energy park and four wind power projects totalling nearly 20 megawatts of capacity.
It is currently half way through its third bond issuance, worth £25 million, to assist in building more green energy projects in Britain — that could generate enough green energy to power over 10,000 homes. The bond offers investors a return of 5.5% per annum (or 6.0% per annum for Ecotricity customers). It is apparently having a faster uptake than the other two bonds and therefore is on track to be oversubscribed too.
However, a lot of developing renewable energy companies out there are finding difficulty in surviving, let alone expanding, due to the shake-up in the industry from the government.
RenewableUK told the Financial Times this week that the wind industry in particular is going to suffer because the turbines, which are designed to last for 20-25 years, will reach the end of the serviceable life during the next government. It says the cut in subsidies and change in planning permission in England has made it difficult for groups to get funding or projects off the ground due to the uncertainty.
“We saw the problems three years ago with the Tories in the coalition. We have already given up on England for now for projects because we knew what they were capable of,” said Vince. “Scotland has more wind and has a different approach to renewable energy, and of course planning permission. We are concentrating on Scotland for our wind power expansion. We saw it coming.”
Britain’s Department of Energy and Climate Change said this week: “Our priority is providing clean, affordable and secure energy that hard-working families and businesses can rely on. We want to protect bill payers, ensuring technologies stand on their own two feet whilst also meeting our renewable energy commitments.”
However, Vince said nothing positive towards the nurturing of renewable energy will happen under this government and the industry will have to weather the storm until they are unseated.
“Every political party gets how important renewable energy is — apart from the Tories. That’s why Ecotricity and I gave money to the Green Party, Labour, the Lib Dems — basically everyone apart from the Tories because they just don’t get it.”
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