This Week Was a Big Moment for Renewables

12/12/2013 14:03 GMT | Updated 11/02/2014 10:59 GMT

As Lord Deben, Chairman of the UK Committee on Climate Change, warned this week, the need to decarbonise is greater than ever. Renewable energy sources like onshore and offshore wind will need to play a big part in that. For the UK's renewable energy industry, publication of the Committee's Fourth Carbon Budget is an important moment. But of more immediate interest was last week's announcement by Government on future strike prices for renewables, which came out ahead of the Autumn Statement.

The bare bones of this are that Government is cutting support for onshore wind and solar, while increasing it for offshore. Without sufficient support the UK's offshore wind programme won't get to a sweet spot beyond which cost reduction and new employment really start to motor. Government still needs to set out a convincing story for its aspiration for offshore wind in the 2020s, but last week most offshore companies think it did just about enough to keep offshore wind delivering and keep the UK in the game for a slice of this new low carbon sector.

But the contrast with onshore wind is stark. Here Government reduced support by £5 per megawatt hour from £95 to £90. This might not seem much to a casual observer, but for some projects this change will mean the difference between going ahead and not. And Government seems happy to make these changes without showing its workings, an omission which has raised eyebrows amongst investors. Let's not forget that what these investors most want is to see politics taken out of energy policy. They therefore look for evidence and rationale.

What is not clear is the Government's motivation for this. Ahead of the announcement Number 10 was briefing that this would result in less onshore wind being built. But announcing the figures later that day Danny Alexander and DECC sought to say that this would not cut the amount of wind deployed, but reduce the cost.

If the Department of Energy and Climate Change is right then onshore wind will continue being built out. But if DECC has its calculations wrong, less onshore will be built, and the shortfall in low carbon generation will need to come from more expensive sources, which will mean the consumer pays more, or less renewable energy gets built with the money available.

Our own assessment is that less onshore wind will be built in the UK as a result of this announcement. That might please a minority, but seems a perverse result. And the big tragedy is that it doesn't need to be this way. There is a way to reduce costs and to see onshore wind continue to thrive. The future for onshore wind is in a world where it competes without fear or favour with other technologies. Subsidies should be there for the shortest time possible. But right now Government has got into the habit of loading on extra cost almost as a quid pro quo of support.

For example, one of the simplest ways to reduce cost would be to make the planning system easier to navigate. Right now too many local planning authorities are struggling to decide objectively on wind farm proposals, creating delay and increasing uncertainty. Government is strong on the need for sustainable development in planning, yet allows delay on planning for wind farms and seems content to prolong a shifting and uncertain policy background.

There are many examples like this. Costs imposed by others on an industry seen as having broad shoulders. And where this gets us to is that we have a Government and an industry in agreement about the need to bring costs down but a disagreement about how. In the week when Lord Deben urged the Government not to delay taking action that is a worry.