Connect with us


Baker Tilly: Government consultation could cause lasting damage to the UK renewables industry



The Government Feed-in Tariff (FiT) consultation proposes a set of measures to: “control costs under the FiT, including revised tariffs based on updated technology cost data, a more stringent degression mechanism and deployment caps leading to the phased closure of the scheme in 2018-19”. The consultation closes at 11.45pm on Friday 23 October.

Commenting ahead of the closure of the Government’s consultation on a review of the Feed-in Tariff (FiT) scheme for renewable energy, Mark Stewart, Baker Tilly’s head of infrastructure and renewable energy in Scotland said: ‘This consultation has all been about the Department for Energy and Climate Change trying to manage its costs and the Government’s response will have very serious implications for the whole renewables sector.

‘In order to remain within the proposed overall budget cap of £75-100m for the FiT scheme (to 2018/19), developers and investors will have to accept the internal rate of return (IRR) hurdle rates assumed for each technology type underpinning the proposed FiT rates going forward.  For solar investors that means four per cent, for onshore wind it is five per cent and for hydro it is nine per cent.  If the cost of the scheme cannot be managed by these deployment caps, DECC proposes to close the scheme for new applicants as soon as legislatively possible, which is expected to be January 2016.

‘Many of our clients have strongly argued that the proposed hurdle rates for onshore wind and solar projects in particular are well below that which would attract investment in the FiT scheme going forward.

‘Sadly for the renewables sector, this consultation is but one of a number of recent UK Government announcements which have rocked the industry. This started with the closure of the Renewables Obligation (RO) for large scale solar projects of 5MW or more in April 2015, followed by the consultation on the intention to close the RO for solar projects of less than 5MW from 1 April 2016 and the intention to close the RO for onshore wind from 1 April 2016 – although this appears to have been defeated in the House of Lords.

“We’ve also seen a delay to the next round of contract for difference (CfD) allocations, the removal of FiT pre-accreditation and the removal of renewable energy generation from the climate change levy exemption. These have all had a detrimental effect on investors, funders, the community and supply chains across the renewables industry. Taken together, they are undermining commitments to tackling climate change and putting thousands of jobs and billions of pounds worth of investment at risk.

‘According to Scottish Renewables, the voice of the industry in Scotland, the impact of these measures could be in the region of £3bn of lost investment and over 5,000 jobs lost in Scotland alone. A report to be issued today by Community Energy England states that capital investment of £127m is now not likely to happen as a result of changes to the FiT scheme, 87% of which are solar projects.

‘The debate on “cost minimisation to the end consumer”, one of Amber Rudd’s key manifesto pledges, will certainly intensify in the coming weeks, particularly as the UK has signed an agreement with the Chinese Government to deliver the £18bn Hinkley Point C nuclear energy plant which is a 3GW power station. It has been argued that the same level of investment would deliver 20GW if invested into offshore wind technology.’

Lindsey Cooper, a partner in Baker Tilly’s restructuring and advisory renewable energy team said: ‘The disproportionate impact on the solar industry is being felt with a number of high profile administrations in recent weeks including the Mark Group and Climate Energy citing a lack of consumer demand resulting from UK Government policy changes. In addition two US groups have recently announced that they will be pulling out of the UK solar market.

‘Companies operating in the sector and their supply chain are facing increased scrutiny from their investors and bankers as they seek to gain comfort around ongoing viability and in some instances projects may be shelved or mothballed. This is a tough time for businesses in this sector and many will need to consider restructuring, merging or even exiting the market.’


Responsible Energy Investments Could Solve Retirement Funding Crisis




Energy Investments
Shutterstock / By Sergey Nivens |

Retiring baby-boomers are facing a retirement cliff, at the same time as mother nature unleashes her fury with devastating storms tied to the impact of global warming. There could be a unique solution to the challenges associated with climate change – investments in clean energy from retirement funds.

Financial savings play a very important role in everyone’s life and one must start planning for it as soon as possible. It’s shocking how quickly seniors can burn through their nest egg – leaving many wondering, “How long your retirement savings will last?

Let’s take a closer look at how seniors can take baby steps on the path to retiring with dignity, while helping to clean up our environment.

Tip #1: Focus & Determination

Like in other work, it is very important to focus and be determined. If retirement is around the corner, then make sure to start putting some money away for retirement. No one can ever achieve anything without dedication and focus – whether it’s saving the planet, or saving for retirement.

Tip #2: Minimize Spending

One of the most important things that you need to do is to minimize your expenditures. Reducing consumption is good for the planet too!

Tip #3: Visualize Your Goal

You can achieve more if you have a clearly defined goal in life. This about how your money can be used to better the planet – imagine cleaner air, water and a healthier environment to leave to your grandchildren.

Investing in Clean Energy

One of the hottest and most popular industries for investment today is the energy market – the trading of energy commodities. Clean energy commodities are traded alongside dirty energy supplies. You might be surprised to learn that clean energy is becoming much more competitive.

With green biz becoming more popular, it is quickly becoming a powerful tool for diversified retirement investing.

The Future of Green Biz

As far as the future is concerned, energy businesses are going to continue getting bigger and better. There are many leading energy companies in the market that already have very high stock prices, yet people are continuing to investing in them.

Green initiatives are impacting every industry. Go Green campaigns are a PR staple of every modern brand. For the energy-sector in the US, solar energy investments are considered to be the most accessible form of clean energy investment. Though investing in any energy business comes with some risks, the demand for energy isn’t going anywhere.

In conclusion, if you want to start saving for your retirement, then clean energy stocks and commodity trading are some of the best options for wallets and the planet. Investing in clean energy products, like solar power, is a more long-term investment. It’s quite stable and comes with a significant profit margin. And it’s amazing for the planet!

Continue Reading


What Should We Make of The Clean Growth Strategy?



Clean Growth Strategy for green energy
Shutterstock Licensed Photo - By sdecoret |

It was hardly surprising the Clean Growth Strategy (CGS) was much anticipated by industry and environmentalists. After all, its publication was pushed back a couple of times. But with the document now in the public domain, and the Government having run a consultation on its content, what ultimately should we make of what’s perhaps one of the most important publications to come out of the Department for Business, Energy and the Industrial Strategy (BEIS) in the past 12 months?

The starting point, inevitably, is to decide what the document is and isn’t. It is, certainly, a lengthy and considered direction-setter – not just for the Government, but for business and industry, and indeed for consumers. While much of the content was favourably received in terms of highlighting ways to ensure clean growth, critics – not unjustifiably – suggested it was long on pages but short on detailed and finite policy commitments, accompanied by clear timeframes for action.

A Strategy, Instead of a Plan

But should we really be surprised? The answer, in all honesty, is probably not really. BEIS ministers had made no secret of the fact they would be publishing a ‘strategy’ as opposed to a ‘plan,’ and that gave every indication the CGS would set a direction of travel and be largely aspirational. The Government had consulted on its content, and will likely respond to the consultation during the course of 2018. And that’s when we might see more defined policy commitments and timeframes from action.

The second criticism one might level at the CGS is that indicated the use of ‘flexibilities’ to achieve targets set in the carbon budgets – essentially using past results to offset more recent failings to keep pace with emissions targets. Claire Perry has since appeared in front of the BEIS Select Committee and insisted she would be personally disappointed if the UK used flexibilities to fill the shortfall in meeting the fourth and fifth carbon budgets, but this is difficult ground for the Government. The Committee on Climate Change was critical of the proposed use of efficiencies, which would somewhat undermine ministers’ good intentions and commitment to clean growth – particularly set against November’s Budget, in which the Chancellor maintained the current carbon price floor (potentially giving a reprieve to coal) and introduced tax changes favourable to North Sea oil producers.

A 12 Month Green Energy Initiative with Real Teeth

But, there is much to appreciate and commend about the CGS. It fits into a 12-month narrative for BEIS ministers, in which they have clearly shown a commitment to clean growth, improving energy efficiency and cutting carbon emissions. Those 12 months have seen the launch of the Industrial Strategy – firstly in Green Paper form, which led to the launch of the Faraday Challenge, and then a White Paper in which clean growth was considered a ‘grand challenge’ for government. Throughout these publications – and indeed again with the CGS – the Government has shown itself to be an advocate of smart systems and demand response, including the development of battery technology.

Electrical Storage Development at Center of Broader Green Energy Push

While the Faraday Challenge is primarily focused on the development of batteries to support the proliferation of electric vehicles (which will support cuts to carbon emissions), it will also drive down technology costs, supporting the deployment of small and utility-scale storage that will fully harness the capability of renewables. Solar and wind made record contributions to UK electricity generation in 2017, and the development of storage capacity will help both reduce consumer costs and support decarbonisation.

The other thing the CGS showed us it that the Government is happy to be a disrupter in the energy market. The headline from the publication was the plans for legislation to empower Ofgem to cap the costs of Standard Variable Tariffs. This had been an aspiration of ministers for months, and there’s little doubt that driving down costs for consumers will be a trend within BEIS policy throughout 2018.

But the Government also seems happy to support disruption in the renewables market, as evidenced by the commitment (in the CGS) to more than half a billion pounds of investment in Pot 2 of Contracts for Difference (CfDs) – where the focus will be on emerging rather than established technologies.

This inevitably prompted ire from some within the industry, particularly proponents of solar, which is making an increasing contribution to the UK’s energy mix. But, again, we shouldn’t really be surprised. Since the subsidy cuts of 2015, ministers have given no indication or cause to think there will be public money afforded to solar development. Including solar within the CfD auction would have been a seismic shift in policy. And while ministers’ insistence in subsidy-free solar as the way forward has been shown to be based on a single project, we should expect that as costs continue to be driven down and solar makes record contributions to electricity generation, investment will follow – and there will ultimately be more subsidy-free solar farms, albeit perhaps not in 2018.

Meanwhile, by promoting emerging technologies like remote island wind, the Government appears to be favouring diversification and that it has a range of resources available to meet consumer demand. Perhaps more prescient than the decision to exclude established renewables from the CfD auction is the subsequent confirmation in the budget that Pot 2 of CfDs will be the last commitment of public money to renewable energy before 2025.

In short, we should view the CGS as a step in the right direction, albeit one the Government should be elaborating on in its consultation response. Its publication, coupled with the advancement this year of the Industrial Strategy indicates ministers are committed to the clean growth agenda. The question is now how the aspirations set out in the CGS – including the development of demand response capacity for the grid, and improving the energy efficiency of commercial and residential premises – will be realised.

It’s a step in the right direction. But, inevitably, there’s much more work to do.

Continue Reading