UK awarded too much in renewable energy subsidies, NAO warns

The UK Government has awarded too much in early subsidies for renewable energy projects at the expense of consumers, the spending watchdog has warned. The criticism comes from the National […]

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By Priyanka Shrestha

The UK Government has awarded too much in early subsidies for renewable energy projects at the expense of consumers, the spending watchdog has warned.

The criticism comes from the National Audit Office (NAO) as it is “not convinced the government sufficiently protected consumers’ interests” in handing out eight contracts earlier this year – “costing consumers £16.6 billion” over their 15-year lifetime.

The NAO claims the subsidies – promised to five offshore wind farms and three biomass projects – leave less money for other renewable projects that will compete for subsidies in the future. It adds that in awarding the contracts, the government has used up 58% of the funds set aside from 2015 to 2021.

“This decision may provide higher returns to contractors than needed to secure the investment and also limits the amount of remaining budget subject to competition in later rounds,” the report said.

Amyas Morse, Head of the NAO added: “As the Contracts for Difference regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the Department’s opportunity to secure better value for money.”

DECC however defended its decision, saying it had been dealing with a legacy of under-investment and neglect in UK energy as well as trying to decarbonise electricity supplies.

A spokesperson added: “These early contracts are designed to offer better value to bill payers than the previous system and have reassured those we need to invest in our energy security. Without that investment, projects would have been unable to go ahead or been significantly delayed – putting our future energy security at risk.”

The eight approved projects are expected to add 4.5GW to Britain’s electricity generation capacity by 2020.