Engineering news
A new system of subsidies for renewable energy in the UK has been given the green light by the European Commission.
The "contracts for difference" scheme, which will pay a guaranteed price for electricity generated from projects such as offshore wind farms, with the cost added to consumer bills, aims to give investors certainty to back low-carbon generation. The EC concluded the scheme meets rules on providing state aid.
Under the £15 billion scheme, established renewable technologies such as onshore wind, solar farms and energy-from-waste sites will compete for a pot of £50 million per year.
Newer and more innovative technologies will initially benefit from a £155 million per year funding pot, and will also be subject to auctions.
Commission vice-president in charge of competition policy Joaquin Almunia said: "The UK contracts for difference encourage all renewable energy technologies producing electricity to compete against each other for support beyond 2016.
"It is a fine example of how to promote the decarbonisation of the economy with market-based support mechanisms, at the lowest possible cost for consumers."
The EC also found that providing public support worth £9.7 billion to five offshore wind farms, which were awarded contracts for difference early without competition to avoid delays in investment, were in line with its rules. The commission said the projects furthered European Union objectives, without unduly distorting competition in the Single Market.
The EC has yet to rule on three biomass projects which were given early contracts alongside the offshore wind farms.
The support given to the eight early movers raised concerns from the National Audit Office that it did not secure the best deal for consumers by awarding more than £16 billion in contracts without competition.
The UK is also waiting for the commission to rule on whether the subsidies negotiated with French energy giant EDF for power generated by the planned new nuclear power plant at Hinkley Point, Somerset, are in line with the rules.
The EC has also approved the UK's planned "capacity market", which will provide payments to generators to ensure there is enough power available to meet peak demand.
Existing and new generators, operators of energy storage systems and schemes which reduce power demand will all be able to bid in annual auctions for the payments to provide needed electricity capacity.
Environmental campaigners have raised concerns that the capacity market will provide millions of pounds a year in payments to old, polluting coal fired power stations up to 2033, undermining efforts to tackle carbon emissions from the power sector.
Paul Massara chief executive of RWE npower, said the move by the European Commission was a major step forward in creating the confidence needed to mobilise investment ahead of the first allocation round for contracts for difference and the first capacity auction.
"Clearly a lot of work has gone in behind the scenes by Department of Energy and Climate Change (Decc) officials to get us to this position and shows that we can work effectively with our European partners.
"RWE are now looking forward to getting the same state aid clearance for biomass investment contracts as have been given to wind energy investment contracts as soon as possible,” Massara added.