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14 | 26TH JUNE - 2ND JULY 2015 | UTILITY WEEK Analysis Policy & Regulation T he Conservatives' energy manifesto was clear: the party, if elected, would halt the spread of onshore wind by removing financial support and giving local communities more power to oppose projects. And energy secretary Amber Rudd wasted no time in pushing the pledge through, tak- ing aim at the Renewables Obligation (RO) with plans to scrap the scheme by April next year and sparking condemnation from green associations and political groups that was as rabid as it was predictable. But the view from those closer to the investment decisions is entirely different: although not quite business as usual, the government has offered a 5.2GW loophole technically large enough to ensure onshore wind capacity will increase by as much as 50 per cent by the end of the decade, just as many investors always predicted it would. Not since Labour's 2013 price freeze pledge has an energy policy attracted so much atten- tion for so little direct industry impact. The UK has almost 9GW of onshore wind capacity installed, representing about 10 per cent of the UK's electricity generation mix. By the end of the decade, investment data from advisory Baringa predicted that the UK would reach 13GW with a further 9.5GW to come from offshore wind projects. Rudd told the House of Commons that even when taking into account the early clo- sure of the RO for onshore wind, the UK will have 11.6GW of onshore wind supported by the mechanism, alongside 0.75GW supported by contracts for difference (CfD) by the end of the decade, just shy of Baringa's original predictions. "This puts us above the middle of the range set out in the EMR delivery plan, our best estimate of what we would need to meet our 2020 targets," Rudd said. And other utilities analysts tend to agree. In the wake of the news, RBC Capital told investors: "In reality it will make little dif- ference to the sector with the grace period ensuring that most projects that would have been online by April 2017 – when the RO scheme was originally slated to close – still likely to be developed. Beyond April 2017, competitive onshore wind projects can still be developed under the auctioning process in the CfD regime." Baringa partner Phil Grant echoed that view, telling Utility Week that "the initial headlines with respect to the RO are bigger than the impact these changes will have. The grace periods are critical for this – making the impact on onshore wind rollout marginal." The 5.2GW grace period reflects the capac- ity that already has planning permission. In addition projects require a grid connection offer and acceptance, as well as evidence of land rights, to be eligible. Of those with con- sent, some projects have already begun con- struction, some are in Northern Ireland where energy policy is devolved and some include small-scale installations. The government estimates that only 2.9GW of the over 5GW planned will take up the grace period offer. "Most of the onshore wind projects that are in the pipeline are not going to be affected – although it is very difficult to tell," EY partner Ben Warren tells Utility Week. And Rudd's work on onshore wind is by no means over. So while the RO may have threatened more than it delivered, a change to the CfD structure could still deliver a body- blow to the industry. "It's not clear quite what this means for projects under a CfD regime," says Grant, "there are mechanisms available to govern- ment not to give any funding to onshore wind under the CfD rule but we will know more when the budgets and technology max- ima are announced for the next CfD round." But Warren's larger concern is the politi- cal furore surrounding onshore wind, and how the nature of the debate may impact the wider renewables context. "It is unhelpful and entirely the wrong angle for government to be taking by saying subsidies will be cut to reduce costs while supporting more expensive options. It's dis- appointing that a newly formed government is still plying the same rhetoric and same messaging of it," Warren said. It seems the politicians might be playing on a different political pitch, but the game remains the same. Down but not out Amber Rudd's cuts to onshore wind aren't as deep as they seem, according to analysts. Jillian Ambrose finds out why. The industry has been unanimous in its dismay at the "baffling" decision to cut support for the "cheapest and most rapidly deployable sources of clean energy". "Not only do these knee-jerk changes affect onshore wind, they dampen confidence across the renewable sector." Caroline Flint, Labour shadow energy secretary "Onshore wind is the cheapest form of renewable electricity we can deploy at scale, so removing financial support completely un- dermines the goal of cutting carbon emissions cost-effectively." Niall Stuart, chief executive, Scottish Renewables "By closing the RO early, the government is letting a vocal mi- nority dictate energy policy. We believe the government should be providing solid, stable support for renewable energy." Juliet Davenport, founder and chief executive, Good Energy "Putting aside the dishonesty of the announcement, this repre- sents a glaring double standard. Planning regulations stipulate that all energy projects over 50MW are decided at national level – yet only wind will now to be decided by local councils." Dale Vince, founder, Ecotricity "Cutting the RO scheme early sends a worrying signal about the stability of the UK's energy policy framework. This could damage our reputation." Katja Hall, deputy director general, CBI "Without confidence in future political and financial support, investors will lose faith in renewable infrastructure development." Tim Waterfield, director, strategic projects, Savills Energy Reaction