Changes to the UK renewable energy subsidies, including programs such as Feed-in Tariff scheme and Renewable Obligation, will contribute a total reduction of GBP500 million-GBP600 million ($746 million-$895 million) from the Levy Control Framework (overspend, the UK government said Thursday.
The LCF is the cap on the amount the government can spend on green energy projects. The control framework makes sure that the Department of Energy and Climate Change achieves its fuel poverty, energy and climate change targets at the lowest cost to consumers.
"The majority of these changes have been flagged by DECC in the past, thus should not come as a major surprise," Citi research analysts said in a note.
"It is worth flagging however, that although these actions will reduce LCF overspend by GBP500 million-GBP600 million, we expect the net impact on the LCF to be less than this due to the recent fall in power prices, therefore increasing the 'subsidies' components of the [Contracts for Difference] contracts," the note said.
Earlier in the day, the UK DECC announced its decision to "deal with the projected over-allocation of renewable energy subsidies" following the conclusion of market consultations.
Among the various revisions to subsidies, the government agreed to slash solar power feed-in-tariffs for households by 65% from current levels to 4.39 p/kWh, instead of the initially proposed cut to 1.63 p/KWh.
Many renewables industry players gave a partial welcome to the government's decision to revise its original proposals.
"Government has partially listened," Paul Barwell, CEO of the lobby group Solar Trade Association said. "It's not what we needed, but it's better than the original proposals." However, he added that allocating only around 1% of its clean power budget to new solar is "too little," especially when solar is now cost-effective.
Also, trade body RenewableUK's Chief Executive, Maria McCaffery, said: "The cuts in tariffs for small and medium-scale wind energy projects remain challenging, but they are not as severe as those originally proposed, meaning that a greater level of new capacity can come forward."
Secretary of State for Energy and Climate Change Amber Rudd said: "We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model."
