The Department of Energy and Climate Change (DECC) was one of the victims of Wednesday’s government spending review with George Osborne announcing an 8 per cent budget cut.
Although not the worst affected department, DECC will see its funding squeezed by £83m for 2015/16 as the chancellor looks to find £11.5bn of additional savings to cut Britain’s budget deficit.
However, the announcement came the day before plans were unveiled for an extra £50bn in infrastructure spending and details were provided on the strike price which will be offered to low carbon electricity generators under the forthcoming Energy Bill.
Energy secretary Ed Davey said: “Our reforms will renew our electricity supply, attracting up to £110 billion investment in a mix of clean, secure power and demand reduction, and will support up to 250,000 jobs up and down the supply-chain.
“The Energy Bill is already progressing well through Parliament and received overwhelming cross-party backing at Commons Third Reading.
“Developers and investors have been crying out for more details, sooner, and that is what we are giving them today.”
The Renewable Energy Association has expressed concern at the amount of cash which will be available to renewable heat. The REA’s calculations show that by 2014/15, only £430m will be available as opposed to the assumed budget of £800m.
REA chief executive, Gaynor Hartnell, said: “It is important that the UK meets its renewables target in the most cost-effective way possible. Heating from biomass is one of the cheapest means of doing this. This poor settlement, coupled with next week’s tariff reductions for medium scale biomass installations, sends a very bad message over the government’s long term support for this sector.
“The UK needs a massive expansion in renewable heat to meet climate change objectives – which will create jobs and growth all along the supply chain. The government should be doing all it can to get the RHI back on track, not cutting its budget.”
Neil Schofield, head of government and external affairs at Worcester, Bosch Group, said: “The budget will barely cover inflation on the commercial RHI budget let alone the introduction of domestic RHI.
“The chancellor is sending a clear message that the future is not renewable energy. The constant delays to the introduction of domestic RHI have led many in the heating industry to believe that there is no real commitment from the coalition government towards domestic renewables. The new policy of starving domestic RHI of vital cash effectively sounds the death knell for the scheme.”
Plumb Center’s head of sustainability, Tim Pollard, said: “It’s never nice to hear about cuts to any sector, but we understand that times are tough and the government has to do what it thinks is best to improve the economy.
“At Plumb Center we work closely with DECC, and are in full support of its energy initiatives like the Green Deal, Renewable Heat Premium Payment (RHPP) and Renewable Heat Incentive (RHI).
“Although DECC’s budget has been cut 8 per cent, I’m sure it will continue to work hard to lower carbon emission and fuel prices, and find the best ways to power our nation affordably and cleanly.”
Maria McCaffery, chief executive of RenewableUK, said: “The confirmation of levels of the draft strike prices is a welcome step forward in setting out how the long term market is going to work. The levels of the strike prices are challenging but possible considering the reduced time periods that renewables will be supported for under contract for difference system compared to the Renewable Obligation.
“However, more details do need to be set out. The most important ingredient remains investor confidence and that will take time to land. The secret is consistent long term support and investors seeing that government is behind renewables and low carbon generation for the long term.”