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Scotland confirms ROC support for wind electricity; DECC move imminent

24 Jul 2012 16:05:44 | edem

The leader of the Scottish government has hit out at the "wholly unnecessary uncertainty" he said is "jeopardising future investment" in onshore wind as a result of the UK's delayed review of renewable electricity subsidy levels.

Alex Salmond, who heads the Scottish National Party, also confirmed that Scotland will shave support for onshore wind generation by just 10% from 1 April 2013 - a considerably more attractive level for generators than the 25% cut the UK government is mulling (see EDEM 17 July 2012).

But the move was followed within 24 hours by confirmation from the UK's department of energy and climate change (DECC) that it will unveil the results of its own review on Wednesday.

Salmond's intervention will be viewed as a deliberate move to tempt potential onshore wind generators to the Scottish market as opposed to establishing assets in England or Wales - with DECC's reaction intended to counter this.

The industry has been awaiting confirmation of the support levels since last October when DECC consulted on a cut for onshore wind to 0.9xROC/MWh from 1.0xROC/MWh.

But it has since emerged that a cut to 0.75xROC/MWh is on the table, with industry sources pointing the figure at likely treasury interference (see EDEM 22 June 2012).

Energy secretary Ed Davey has long insisted the central government banding review, which will cover renewable generators of more than 5MW capacity across England and Wales, will be "evidence based".

Intervention

But in a strongly worded letter to Davey, Salmond said: "Our consultation proposals are based on independently gathered and published evidence on costs and likely deployment. That robust and reasoned analysis and evidence supports an onshore wind band of 0.9 ROCs".

Salmond continued: "I am not aware that any robust and convincing evidence exists to support a change from this proposal. Should there indeed be made available any new and compelling evidence to suggest a different level, then we will of course consider that".

Under devolution laws, the Scottish government sets its renewables obligation certificate (ROC) banding levels independently of the UK central government.

Scotland is aiming to generate the equivalent of 100% of its consumed power from renewable sources by 2020, with any excess available for export (see EDEM 12 December 2011).

Giant utility SSE, the largest renewable power generator in the UK, welcomed the Scottish government's intervention

"This sector is making investments, creating jobs and delivering indigenous sources of energy, but all of these things are dependent on the right level of support and confidence in the sustainability of the investment framework," a spokeswoman said.

In this context, the Scottish government's announcement is important, timely and encouraging for the long-term future of renewable energy."

ICIS Energy's forward ROC assessments value 1.0xROC at £46.16/MWh (€59.29/MWh) for the 2013/2014 compliance period, and see it climbing to £47.27 for the 2014/2015 period.

A 10% cut in financial support for the onshore wind sector would therefore equate to a £4.62/MWh drop in the value of clean power during the 2013/2014 period, climbing to £4.73/MWh in 2014/2015. JS

See sister publication European Clean Energy Markets (ECEM) for ICIS assessments of UK ROC valuations. For more details, call +44 207 911 1919 or email: sales@icis.com

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