Isra-Mart srl:Chancellor “ruthlessly” prioritises investment in green energy

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After months of speculation, the Chancellor has today (October 20) laid to rest fears over cuts to renewables funding by announcing in the Spending Review that the government will "ruthlessly prioritise" investment in green energy infrastructure.

While George Osborne outlined how the government would aim to make cost cuts to help address the £109 billion budget deficit, he committed to investing in a number of renewable energy schemes including a funded Renewable Heat Incentive (RHI), A Green Investment Bank and £200 million for the development of offshore wind.

However, other incentive schemes are due to be scaled back, with Feed-in Tariffs set to be refocused on the "most cost-effective" technologies to save £40 million in 2014-15. These changes will not be implemented until the first scheduled review of tariffs though, unless higher than expected deployment requires an early review.

And, it has been revealed that over the course of the Spending Review period, 2011-12 to 2014-15, DECC's resource spending will be reduced by 18% and the department will also see a 33% cut in its administration budget. However, capital spending will increase by 41% in real terms.
Principles

Kicking off the Spending Review announcement, the Chancellor hailed today as "the day when Britain steps back from the brink and confronts the bills from a decade of debt".

He noted that Britain currently has a budget deficit of £109 billion and claimed that in an attempt to address this, the government has "left no stone unturned in our search for waste".

The three principles said to have guided the Spending Review include reform, fairness and finally growth - under which Mr Osborne stressed: "when money is short we should ruthlessly prioritise those areas of public spending which are most likely to support economic growth, including investments in our transport and green energy infrastructure, our science base and the skills and education of citizen".
RHI

One of the key policies which has been extensively lobbied for across the renewables industry has been the Renewable Heat Incentive. And, today saw Mr Osborne end the uncertainty over the proposed scheme by pledging £860 million of funding for the subsidy measure.

This announcement has also put to bed concerns over how the scheme would be funded, with the government set to foot the bill rather than implementing an "overly complex" renewable heat levy.

However, it is unclear as to whether the April 1 2011 introduction date, promised by the previous administration, will be met, with the Treasury document claiming that it will be introduced from 2011-12.
Wind

Elsewhere, Mr Osborne pledged £200 million for low-carbon technologies including offshore wind and manufacturing infrastructure at port sites.

And, he revealed that the government will initially capitalise a new Green Investment Bank with £1 billion of funding, adding that he hoped more money would be raised by the private sector and the sale of government-owned assets.

The GIB will help finance green infrastructure through having an "explicit mandate to tackle risk that the market currently cannot adequately finance". It aims to facilitate the entrance of new types of investor into green infrastructure so that the impact on the finance gap for low carbon investment "is many times the scale of the public contribution".

The Bank will make its investment decisions independent from political control and will employ private sector skills and expertise. The government aims to complete design and testing work by Spring 2011.

Commenting on the impact of today's spending review on DECC, energy secretary Chris Huhne "DECC is playing its part in tackling the deficit. Like the rest of the public sector we have taken some tough decision, but we remain on course to deliver on our promise to be the greenest government ever.

"We will help create green jobs and green growth - and secure the low carbon investment we need to keep the lights on."
Carbon

In cuts to other areas, the CRC Energy Efficiency scheme is going to be simplified to reduce the burden on businesses, with the first allowance sales for 2011-12 emissions now taking place in 2012 rather than 2011.

Also, seven projects which were likely to turn hundreds of thousands of tonnes of household waste into energy have had their PFI funding withdrawn by the Department for Environment, Food and Rural Affairs (Defra).

In more positive news, Mr Osborne has pledged up to £1 billion of investment in one of the "world's first" commercial scale Carbon Capture and Storage (CCS) demonstration projects.