Government forced into wind farm rethink after Lords rejects subsidy closure

House of Lords votes to scrap early end to Renewables Obligation for onshore wind, fueling hopes government could be forced to water down controversial reforms

The government may be forced to re-think plans to halt subsidies for new onshore wind farms, after suffering a defeat in the House of Lords this week.

Peers on Wednesday evening backed a Labour motion to delete a clause in the Energy Bill that would close the Renewables Obligation subsidy scheme for new onshore wind farms in April 2016 - one year earlier than planned.

Baroness Worthington, the Shadow Energy and Climate Change Minister, said the government had undermined its own argument that it was saving bill payers money because its impact assessment showed homes would save only 30 pence per year as a result of ending support for new onshore wind developments.

Peers also criticised the grace period the government has proposed for projects that were already in the pipeline ahead of the planned subsidy changes as unfair. For example, critics warned some projects that had the green light from local councillors to build a project by the cut-off date of 18 June may not be eligible for the grace period if they did not have all the relevant paperwork by that deadline. In contrast, projects that were rejected and then filed an appeal before 18 June could be eligible for the RO.

Peers voted to delete the clause by 242 votes to 190.

Luke Clark, head of public affairs for trade association RenewableUK, said the government may now be forced to rethink its plans as a result of the vote. However, he admitted that in the long term the vote was unlikely to have a major impact on industry fears that the sector will be drastically curtailed in the UK.

The Conservative manifesto included a commitment to 'end new subsidy for onshore wind' and while there has been some debate about how the wording of the pledge should be interpreted, Ministers have made it clear they wish to see financial support for new projects end while at the same time making it harder for new developments to secure planning permission.

The bill will return to the House of Commons, where the government is likely to reinsert the clause, Clark predicted.

However, Ministers may have to include a number of concessions relating to the grace period conditions and planning permission to ensure it passes in the House of Lords at the next reading.

Dr Gordon Edge, RenewableUK Director of Policy, added that the defeat could create further uncertainty for investors. "What renewable energy developers urgently need from the Energy Bill is clarity, to minimise the impact of the changes on investor confidence. While we are concerned about the possibility for delay that the vote causes, we hope last night's debate gives the government pause for thought around some of the finer details of grace period eligibility," he said in an emailed statement.

The government's own impact assessment shows the grace period would allow 3GW of onshore wind farms to still be eligible for the RO. However, industry insiders argue many of these projects may now have lost the confidence of investors so may not be built.

A spokeswoman for the Department of Energy and Climate Change was considering  response to the latest developments at the time of going to press.