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Renewables Obligation Early Closure: What This Means

Renewables Obligation Early Closure: What This Means

Following weeks of speculation and forming part of the Conservatives’ manifesto pledge to end new onshore wind farm subsidies, the Department of Energy and Climate Change (DECC) have today announced that the Renewables Obligation (RO) will be closed to new onshore wind projects in April 2016 - instead of its currently scheduled closure date of April 2017.

The announcement by the Secretary of State, Amber Rudd, came in a press release that states that the UK Government are committed to cutting carbon emissions by fostering enterprise, competition, opportunity and growth, and that the UK Government “want to help technologies stand on their own two feet, not encourage a reliance on public subsidies”.

Understandably, large sections of the energy industry have reacted angrily to the plans. The Scottish energy minister, Fergus Ewing, in a statement that echoes events surrounding the recent closure of the RO for large-scale solar, has suggested that judicial review against the changes could be brought and such changes would have a “disproportionate impact” on Scotland, where the majority of proposed turbines are to be built. In addition, Renewable UK have said that the proposed change sends a “chilling” signal to all infrastructure investors in the UK in terms of investment certainty provided by the UK Government.

Crucially for the industry however, DECC have announced that there will be a “grace period” to allow projects that benefit from planning consent, and that have in place the necessary grid connection and property arrangements, to participate in the RO despite the early cut-off. Current estimates suggest that there is at least 5.2 GW of onshore wind developments that have already been granted planning permission and could still qualify for the RO under the proposed loophole.

The detail of the grace period requirements are yet to be announced, but the industry will hope that lessons have been learned from the recent closure of the RO to large-scale solar projects, and the grace periods will permit developers who have made significant financial investment in their projects to benefit from the RO in the manner in which they intended when taking their respective projects forward. Depending on how the grace period requirements are drawn up, and given the current state of development of a large number of the onshore wind projects seeking to meet the 2017 cut-off, it is hoped that the majority of projects in the pipeline will benefit from the grace period exemption to allow for their construction and participation in the RO (as envisaged).

There are however considerable concerns for projects that are currently in planning, and how the grace periods will treat such projects, despite the significant financial commitment that may have been made to date. In addition, we are aware of a number of onshore wind projects that have connection dates that are already close to the existing 2017 closure date – the timescales for such grace periods and any permitted extensions for grid delay or other events will need to be considered further in light of the announcement.

We await further information from DECC on how the closure will be implemented and the criteria for grace periods, and will comment further on the practical impact of such developments when more information is available.

Peter Ward
Senior Associate

LChalmers