Cutting the onshore wind subsidy

The Conservative party promised in its election manifesto to “end any new public subsidy for [onshore wind farms] and change the law so that local people have the final say on [their] applications”. It argued that “onshore wind farms often fail to win public support, and are unable by themselves to provide the firm capacity that a stable energy system requires”. Keeping true to its promise, the Government announced last week that it would end subsidies for onshore wind a year earlier than planned – closing the Renewables Obligation (RO) subsidy scheme for new onshore wind farms from April 1 2016, instead of 2017 and changing the law to give local people the final say on large applications of more than 50MW. As recently as October 2014, the government was still promising the RO subsidy would continue for new onshore wind until March 2017. There are four important aspects of this announcement that deserve reflection. First, investments in energy generation in the UK are now largely orchestrated by government policy. Private investment incentives rely critically on the details of government policy, including technology-tailored consumer subsidies and a range of contracts brokered and in some cases guaranteed by the state. Tinkering with the policy framework around energy generation in unpredictable ways causes policy risk and uncertainty, which, as our research on infrastructure policy has highlighted, damages the investment environment and raises the costs to consumers through policy risk premiums that are bolted on to the normal costs of capital. Second, the manifesto pledge and policy announcement follow closely demands from Conservative MPs set out in a letter to the Prime Minister in 2012, which echoed concerns in their constituencies that onshore wind farms would blight the local landscape. It is, of course, perfectly understandable that those seeking election or re-election lobby government on behalf of their constituents and reflect their specific concerns. This is, however, also an example of the difficulty in securing local public consent around the siting of infrastructure projects which leads to an on/off approach and delays where local interests can override national priorities. It is not a way of policy making that serves anyone’s long-term interest. It is often the by-product of inadequate engagement with local communities and deficiencies in the compensation mechanisms that are in place. Third, the National Planning Policy Framework introduced in 2012 attempted to streamline and simplify the planning process of infrastructure projects that fall below the threshold of “Nationally Significant Infrastructure Projects”, such as rail depots and wind farms. Last week’s policy announcement overturns this framework with local decision-making in the case of onshore wind, creating obvious inconsistencies with the prevailing approach to other projects and technologies. It is not clear, for example, why local communities should have a greater say in the approval of wind turbines than in oil and shale gas sites, or nuclear power stations. Finally, the letter from the Conservative MPs stated that “it is unwise to make consumers pay, through taxpayer subsidy, for inefficient and intermittent energy production that typifies on-shore wind turbines…we ask the Government to dramatically cut the subsidy for on-shore wind and spread the savings made between other types of reliable renewable energy production and energy efficiency measures.” Yet, onshore wind is among the cheapest, least subsidy-reliant forms of renewable energy generation. In a recent report, the Committee on Climate Change went as far as saying that “if the objective is to bring forward investments on the cost-effective path to power sector decarbonisation, then onshore wind should continue to be supported… failure to invest in it is a departure from the cost-effective path, which will ultimately result in higher energy bills at a time when energy affordability is a significant concern.” This calls into question the evidence base underpinning the Conservative MPs’ remarks, and the wisdom of taking them as guidelines for policy. All in all, last week’s announcement is yet another example of the perils of formulating infrastructure policy without institutions that facilitate informed discussion of the options and constructive engagement and deliberation with the public. Until we move in this direction, we can expect the way we make infrastructure policy to remain troubled with poor investment, inadequate engagement with citizens, inconsistencies in approach, and weak evidence.