Library filed under Taxes & Subsidies from Europe
Ministers had been due to announce revised subsidy levels for renewable energy technologies yesterday - a decision originally due in the spring but delayed amid political infighting over the scale of cuts for onshore wind farms.
The Conservatives argue that wind turbines are a blight on the countryside and were built only because the energy market was unfairly rigged in their favour by subsidies. Mr Osborne is understood to have supported the backbench demands. The Chancellor was confident yesterday of securing a deal to cut the subsidies sharply over several years.
The decision to trim the feed-in tariff came after Bulgarian Energy Minister Delian Dobrev attributed the 13 percent increase in retail power price to renewable energy development. He added that the government had avoided an even larger increase by taking action to slow down renewable energy growth.
"The new taxes that are being considered are astronomical," Miguel Salis, chief executive officer of Eolia Renovables SA, a Madrid-based wind and solar farm developer. "They represent 9 percent to 20 percent of gross revenue for these plants, which would create several problems, including many solar plant defaults."
According to various reports, the Treasury has been demanding a 25 per cent cut to the subsidies, following pressure from Conservative backbenchers who are mounting an increasingly vocal campaign against wind farms and renewable energy subsidies.
After conducting technical studies, the energy department proposed a subsidy cut of 10% for power from onshore wind. But the chancellor is under pressure from back-benchers to scrap subsidies, and is said to favour a 25% cut. The industry body, Renewable UK, says it may take legal action if the government makes a decision that overrides its own technical evidence.
Solar subsidies cost German consumers billions of dollars a year and are widely regarded as inefficient. Even environmentalists are concerned that Berlin's focus on solar comes at the detriment of other renewables. But the solar industry has a powerful lobby, and politicians have proven powerless to resist.
Wind industry trade body RenewableUK has called on Britain's government not to close off the option of extending the current Renewables Obligation support scheme beyond 2017, fearing delays in the transition to the proposed Contracts for Difference (CFD) mechanism that will replace it.
The Observer has learned that George Osborne is demanding cuts of 25% in subsidies, a reduction the industry says would "kill dead" the development of wind power sites. The Treasury's stance has put the chancellor at loggerheads with the Liberal Democrat energy secretary Ed Davey, whose party strongly supports more renewable energy.
"They destroyed the Spanish market overnight with the moratorium," European Wind Energy Association Chief Executive Officer Christian Kjaer said in an interview. "The wider implication of this is that if Spanish politicians can do that, probably most European politicians can do that."
The aspect of the energy policy that has drawn the greatest criticism, however, is the fact that it has been accompanied by higher electricity prices for companies and consumers alike. ...Germany's largest steelmaker, ThyssenKrupp, even blamed the policies for the sale of one of its steel mills. European Energy Commissioner Günther Oettinger has even warned: "High electricity prices have already initiated deindustrialization in Germany."
Official projections suggest that much of the floor price charge to UK companies will actually be paid by consumers as firms recoup their costs through higher bills. The Treasury has estimated the floor price will raise £1.4 billion by 2015-16.
"We're seeing a major step backward regarding clean-energy jobs because of a lack of strategic industry policy coming from the federal government," Steffen Streu, a spokesman for the economy ministry in Brandenburg, said. "It was always said that each coal job given up will re-emerge in the renewable sector. That's not the case at the moment."
France's highest administrative court has been advised by an independent magistrates to cancel preferential tariffs for wind-generated electricity, Les Echos reported, citing industry officials.
"We're cutting the subsidy to onshore wind because I think it has been over-subsidised and wasteful of public money," he said during weekly Prime Minister's Questions in the House of Commons. "The second thing we're doing is the Localism Act will give local communities a greater say over issues like wind turbines".
Spanish consumers were allowed to run up that debt because previous administrations agreed that utilities should book more revenue than they were permitted to collect. The gap accelerated during the last five years, swollen by subsidies added to power bills to support renewable power plants, energy efficiency projects and domestic coal mines.
Some of the world's biggest wind companies, who are considering expanding their business in Britain, say they are reviewing their investments due to a growing backlash against the technology.
The attractions of the "anti-wind" letter are emphasised by the apparent difficulty in organising a counter-demonstration of support. Heaton-Harris took just three days to collect his signatures; weeks later, nobody has got an equal number of MPs to sign support for onshore wind - although a group of pro-renewable interests is mustering backing from more predictable interests, including renewable companies and environmental campaigners.
"The government's own data shows that in spite of its unpopularity the wind industry is in fact having an easy time in planning, with the vast majority of schemes being forced on unwilling local populations. "Very high subsidy levels have resulted in an overheated market and a rush of development that is inappropriate and environmentally damaging, as well as being extremely expensive for the consumer."
Spain halted subsidies for renewable energy projects to help curb its budget deficit and rein in power-system borrowings backed by the state that reached 24 billion euros ($31 billion) at the end of 2011.