Renewables policy hopes dashed by tariffs row

Departmental wrangling over "feed-in tariffs" scuppers Ed Miliband's aim to have policy in place by Copenhagen summit
Ashley Seager
guardian.co.uk, Sunday 22 November 2009 17.35 GMT
Ed Miliband's hopes of having a key government policy on renewable energy in place before the Copenhagen summit have been dashed by internal wrangling over the final levels at which so-called "feed-in tariffs" (FITs) will be set. Officials at Miliband's department of energy and climate change (DECC) have admitted that the announcement – originally due around now – will not come until January.
The Treasury insists the full details of the FITs are still scheduled to be released around the time of Alistair Darling's pre-budget report on 9 December. But sources say Treasury officials – egged on by the regulator Ofgem – are having last-minute concerns about the potential cost.
Energy companies, in turn, are worried that the delay will jeopardise the supposed 1 April launch date to FITs consumers, because they may not have had enough time to prepare for it. The nuclear industry, too, has been lobbying against support for renewables because it undermines the case for new nuclear stations.
FITs work by rewarding installers of renewable energy sources, such as wind turbines or solar photovoltaic panels, for every unit of green electricity they generate and/or feed in to the national grid. They produce a steady return on investment for households, thus stimulating take-up of renewables and the growth of a new industry. Germany introduced one a decade ago and has created more than a quarter of a million jobs as a result.
Britain has been slow off the mark and has one of the lowest proportions of renewable energy in the EU. Ofgem says in its submission to DECC's consultation, however, that FITs offer bad value for money and that DECC should stick to giving people loft insulation and smart meters.
It says the aim of offering a return on investment to households of 5-8% is "disproportionately high compensation", even though DECC has been told by many other industries and potential installers of renewables that it is too low to make them invest. Germany offers more like 10%.
Alan Simpson, Miliband's special advisor on renewable energy, said: "The trouble is that the Treasury, Ofgem and government officials have driven this policy with a towering lack of ambition."
He said the aim is to get 2% of electricity from microgeneration. "If they were five times as ambitious, it would only cost the average family another £2 a year. But energy companies and Ofgem don't want to go down that path – they have created a cosy oligopoly which produces non-renewable energy and ever-spiralling prices."
The stop-go nature of various support programmes such as the low carbon buildings programme (LCBP) in the past few years have driven the country's fledgling renewables industry almost to despair.
"It's a source of deep concern that DECC and OFGEM seem to be forever failing the UK renewables industry. After the disaster of LCBP we were hoping for smooth transition to FIT, which would have kick-started the industry 10 years after the Germans lead the way," said Ian Goodwin, renewable energy services director at energy saving and generation firm the Mark Group.