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Energy austerity

While changes to the timing and swiftness of the UK Government’s announcement of its early withdrawal of the Renewables Obligation Certificates (ROCs) is surprising, that it was coming is not. Alan Shanks, Partner at HBJ Gateley gives PES his views on the future of wind farm subsidies.

The UK government’s manifesto warned before the election that it would expedite closing down the current subsidy regime, to replace these with Contracts for Difference (CFDs) from April 2017, and the industry has been working towards this for some time. This announcement moves that closing date one year forward to April 2016.

On top of the potential, though much-discussed, political and legal issues, another significant implication of the announcement is that it undermines investor confidence in UK Government policy by changing the rules. This is not something the UK is usually guilty of, and a reason why it – and Scotland as part of it – has been hugely successful in attracting foreign investment.

How the next few months play out will likely also influence investor sentiment in addition to any practical, legal or otherwise implications the early closure announcement has on the industry.

After all, 12 months is a significant period of time in any major energy project. It can make the difference between success and failure, delivery and suspension. Indeed, in this case, whether or not certain projects go ahead at all will be down to where they fall, development-status-wise, within those 12 months.

Investors will be aware of the long lead-ins required to deliver return, and might be discouraged from investing in a market with apparently changing goal posts.


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