The Department of Energy & Climate Change (DECC) has announced that support under the Renewables Obligation (RO) for onshore wind will end from 1 April 2016 - a year earlier than provided for in the Renewables Obligation Closure Order 2014. Stringent new planning tests have also been announced for wind farms in England.
Renewables Obligation
The early closure will be of little surprise to the renewables industry, as it delivers a Conservative election manifesto pledge, and was confirmed in the briefing note to the 2015 Queen's Speech.
DECC has stated that it is "minded" to offer grace periods to projects that, as of 18 June 2015, had planning consent, an accepted grid connection offer and evidence of land rights. No further details on the grace periods were announced.
However, we expect that the requirements will follow those that currently apply to ground-mounted solar projects with a capacity of greater than 5MW. The commentary provided by DECC certainly appears to allude to the "significant financial commitment" grace period that applies to solar. The grid delay and radar grace periods that were due to have effect from 1 April 2017 will presumably be brought forward in the case of onshore wind to apply from 1 April 2016.
It remains to be seen what impact this will have on the market for consented projects. Developers may experience improved pricing for projects which can be built under the RO in the short term. If a bubble arises, the construction costs of projects could increase, with turbine suppliers in particular seeing an improvement in margins.
While similar patterns were seen in the solar industry, it is difficult to assess how much was attributable to demand, and how much was as a result of the continued application of minimum import pricing. It is also not known at this stage whether projects commissioned after 31 March 2016 in reliance on a grace period will experience a lower Renewables Obligation Certificate (ROC) banding, and also whether DECC would consider any adjustment to such projects being eligible to bid for a Contract for Difference (CfD).
Following the successful legal challenge to DECC's previous decision to retrospectively cut the solar feed-in tariffs, DECC has announced that it is taking the unusual step of making the early closure via primary legislation - by which DECC hopes to avoid the risk of challenge in the UK courts as a result of the doctrine of parliamentary sovereignty.
Planning
Alongside these changes in the subsidies for onshore wind, the Government also announced stringent new planning tests for wind turbines and wind farms, which will make it extremely difficult for new projects to receive planning permission.
The policy statement issued on 18th June requires that local planning authorities should only grant planning permission if:
- the development site is in an area identified as suitable for wind energy development in a Local or Neighbourhood Plan; and
- following consultation, it can be demonstrated that the planning impacts identified by affected local communities have been fully addressed and therefore the proposal has their backing.
As very few Local Planning Authorities (LPAs) have identified areas as suitable for wind energy development in Local or Neighbourhood Plans, particularly in England, and are unlikely to do so in the foreseeable future, the first test will make it almost impossible for new projects to gain planning permission.
Where areas have been identified, it is difficult to see how the second test can be satisfied where there is any local opposition. Turbines by their very nature will have a local landscape and visual impact which is incapable of being "fully addressed" as required by the second test. Any level of local opposition will, therefore, according to the new policy, lead to a refusal of planning permission.
Applications for onshore wind have generally been approved where the benefits of exploiting the renewable energy resource outweigh the local impacts. It appears that these benefits will not now be weighed in the balance.
It is unusual to see particular sub-sectors singled out in this way with a requirement to refuse permission unless stringent tests are satisfied.