An industry buffeted by restrictions and scepticism
September 19, 2012

The UK has committed to halving its greenhouse gas emissions by 2025. It plans to do so through a series of mandatory carbon budgets. Analysis by the Committee on Climate Change, the independent body that advises the government, makes clear that to reach this target, electricity generation will have to become almost carbon-free.

Over the last few years Britain has added about 600MW of onshore wind capacity a year. Offshore wind is on a steeper trajectory and is starting from a lower base. About 500MW was added in 2011. The government hopes to increase wind capacity from its current level of 6.4GW to 27GW by 2020. Projects to provide a total of 11GW are already under development.

Yet the industry is facing tough times. The planning process for wind has always been difficult, but over the past year approval rates for new construction projects have fallen (to around 50 per cent in the case of onshore wind) and the time it takes to get planning consent has increased.

Less tangible, but just as important, has been a change in the tone of the debate. There has always been concern about the environmental impact of onshore wind and the cost of offshore wind. But attitudes have become more hostile, perhaps as a consequence of the economic situation but also due to recent, more overt climate-change scepticism.

The government has been lobbied hard by those who see shale gas as a cheaper alternative to renewable energy. The Treasury is tempted by the possibility of cheap gas, but its scope here in Europe is still uncertain, and the Committee on Climate Change has warned that a new “dash for gas” without carbon capture and storage is incompatible with carbon targets.

The result of the heightened debate is an apprehensive wind-power industry. The recent review of the renewable energy government-funding mechanism, which saw a 10 per cent cut in onshore subsidies, was rightly seen as a rational response to falling costs. However, the wider debate has raised concern about a lack of political leadership. The government’s forthcoming energy bill is therefore crucial to clarify objectives and calm investors’ nerves. For nervous investors mean higher energy costs.