3Recent policy changes
28.Following the 2015 General Election the UK Government has made several changes to the policy framework which supports the deployment of new renewable electricity generators. The key changes which have been made are:
- Closing the Renewables Obligation scheme to onshore wind and small scale solar PV a year early, in 2016.
- Reducing the level of support available through the Feed-in-Tariff scheme.
- Delaying the next round of Contracts for Difference, and indicating that these will not be made available to all renewable technologies.
We set out below the background to these changes and the impact they are likely to have on Scotland.
Projected overspend and manifesto commitments
29.In July 2015 it was forecast that, under policy as it stood then, support for renewables would cost significantly more than the limits the Government had set, with actual spending projected to be £1.5bn above the Government’s limit by 2020–21.37 Forecast spending, compared to the limits set by Government, is set out below.
Table 2: Levy Control Framework limits and projected overspend
|
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
|
|
Limit |
£4.30bn |
£4.90bn |
£5.60bn |
£6.45bn |
£7.00bn |
£7.60bn |
|
Forecast |
£4.34bn |
£5.46bn |
£6.26bn |
£7.21bn |
£8.38bn |
£9.10bn |
|
Overspend |
£0.04bn |
£0.56bn |
£0.66bn |
£0.76bn |
£1.38bn |
£1.5bn |
Source: Department for Energy and Climate Change, Controlling the cost of renewable energy, July 2015
The then Minister of State for Energy and Climate Change, Andrea Leadsom MP, told us that the recent changes had been intended to control costs, in light of the projected overspend on support for renewables.38 She said that the Government’s targets for the deployment of renewable electricity generators had been exceeded, and it was therefore appropriate to take action to limit costs to consumers.39
30.Although reducing costs to the consumer is clearly a significant factor in the recent changes, the projected overspend on renewables is not the only thing which has informed recent policy changes. The Conservative Party’s 2015 manifesto, produced months before the Office of Budget Responsibility published its projections that the Levy Control Framework limits would be exceeded, committed to ending any new public subsidy for onshore wind farms.40 The Conservative manifesto noted that onshore wind “makes a meaningful contribution to our energy mix and has been part of the necessary increase in renewable capacity”, but stated that onshore wind farms “often fail to win public support” and “are unable by themselves to provide the firm capacity that a stable energy system requires”, and they would therefore end any new public subsidy for them.
Early closure of the Renewables Obligation to onshore wind and small solar PV
31.The first announcement made by the current Government about changes to support for renewables was the announcement, on 18 June 2015, of the early closure of the Renewables Obligation to onshore wind. The Government announced that it intended “to end new public subsidies for onshore wind farms by legislating to close the Renewables Obligation across Great Britain to new onshore wind generating stations from 1 April 2016”.41 This was subsequently provided for by the Energy Act 2016, which also established grace periods for projects which already had in place, by the date of the announcement of the RO’s early closure, planning approval, arrangements for a grid connection, and ownership of the relevant land.42
32.Following the projected overspend of the LCF, the Government also launched a consultation on controlling subsidies for solar PV of 5MW and below under the RO,43 and subsequently decided to bring forward the closure of the RO to new solar PV projects at 5MW or below, also from 1 April 2016.44 This was provided for by the Renewables Obligation Closure Etc. (Amendment) Order 2016, which also established grace periods similar to those for onshore wind.45
Cuts to Feed-in-Tariffs
33.As a further part of its efforts to reduce the costs of supporting renewables, in July 2015 the Government announced that it would be reviewing Feed-in-Tariffs so as to “drive significant further savings”.46 The Government consulted on changes to the FIT scheme, and their consultation document noted that “there have been significant reductions in technology deployment costs, beyond 50% in certain tariff bands”.47 Around 90% of consultation responses disagreed with the Government’s proposed tariffs, stating that they were too low to bring forward new generation.48 The final tariff rates brought forward by the Government for solar PV were cut less drastically than initially proposed, but tariff rates fell by an even greater level than proposed for hydro and wind.
Delays to next round of Contracts for Difference
34.The first round of CfDs was held in October 2014, offering contracts worth £315 million to support the deployment of over 2 GW new generating capacity.49 The allocation of funds was divided into different “pots”, with £65 million set aside for established technologies such as onshore wind and solar PV, and £260 million set aside for less established technologies such as offshore wind and biomass.50 The vast majority of contracts were offered to offshore and onshore wind projects—89% of contracts by capacity, and 91% by value.51 The Government stated that the competitive nature of the CfD process meant the new generating capacity would be provided £110 million more cheaply than it would have been under the Renewables Obligation.52
35.A second round of CfDs was originally planned for the autumn of 2015, but it was reported in July 2015 that organisations enquiring about the next round of CfDs were told “There will be no CfD round this October. In the autumn, the Government will set out its plans in respect of the next CfD allocation round.”53 There was no official announcement about future rounds of CfDs until November 2015, when the then Secretary of State for Energy and Climate Change, Amber Rudd MP, stated that the Government intended to make funding available for three auctions in the current Parliament, with the first to be held by the end of 2016.54 We consider the next round of CfDs in more detail below.
Ad hoc responses and lack of transparency
36.Much of our evidence complained about the UK Government’s lack of clarity about future support for renewables, and the process which was followed to implement recent changes.55 The Government has consistently stated that recent policy changes were made in response to the projected overspend of the Levy Control Framework, but the actual changes show little sign of being part of a strategic plan for energy policy. The changes which have been made have been announced, consulted on (where consultation has occurred at all) and implemented in an ad hoc manner, and there is little indication of why certain technologies or support mechanisms have been cut in favour of others. Andy Kerr, Executive Director of Edinburgh Centre for Carbon Innovation, told us that there had been “a series of announcements that came in at very short notice”, and this meant businesses were “immensely frustrated”.56
37.Joan MacNaughton, Executive Chair of the World Energy Trilemma Study Group for the World Energy Council, questioned the process by which recent policy changes have been made. Ms MacNaughton told us:
large parts of the industry were not clear just what the exemptions would be, what the grace periods would be, at that time and they didn’t have long from the announcement last summer until the closure. I think there is something about the way in which you handle the change, the way in which you allow people the time to adjust.57
38.When the Levy Control Framework was established, HM Treasury produced a “control framework” for levy-funded DECC spending, which required that in the event of a forecast that DECC’s cap on spending would be exceeded, HM Treasury must be satisfied that there is “a robust, agreed plan in place to bring spend back down to within the cap”.58 The Energy and Climate Change Committee’s recent Report on Investor confidence in the UK energy sector suggested that it was not clear whether DECC had agreed a plan with the Treasury regarding its response to the projected LCF overspend, and recommended that “DECC develops and publishes a structured response plan, setting out how any future overspend would be dealt with”.59
39.Although the Government has stated that recent policy changes were necessary to respond to the projected overspend of the Levy Control Framework, these changes have been implemented in an ad hoc way. There has not been enough transparency regarding how decisions have been made, and it is therefore not clear how the Government arrived at the specific options it has chosen. The way in which the Government has responded to the projected overspend has created uncertainty for the renewables sector.
40.We concur with the Energy and Climate Change Committee’s recommendation that the Department of Energy and Climate Change should develop and publish a structured response plan, setting out how any future projected overspend of the Levy Control Framework would be dealt with. We also recommend that the Government establish procedures for the communication of any future projected overspend, and also the Government’s response to that overspend. This should be developed with a view to ensuring the renewables sector is as well-informed as it can be as soon as possible, and that it is transparent how the Government has come to its decisions.
Impact on the renewable electricity sector in Scotland
41.The central concern of this Report is how recent changes to renewables policy have affected Scotland, and the overwhelming message in the evidence we have received is that these changes will have a negative effect on the renewables sector, both in Scotland and across the UK.60 Uncertainty about support for onshore wind has resulted in many projects being pulled, and a significant reduction in new projects being brought forward. The cancellation of projects which were already in development means lost capital for investors who include local authorities, community groups and private companies. We have also heard that changes to FIT tariffs could mean Scotland’s hydro industry will “all but disappear”,61 and cuts to support for solar PV could prevent deployment in Scotland from ever reaching the levels of other parts of the UK.62 The Edinburgh Centre for Carbon Innovation told us that “The approach of the UK Government since its election last May has been extremely disruptive to the renewables industry in Scotland, and hinders its ability to grow in future.”63 Angus McCrone, Chief Editor at Bloomberg New Energy Finance, summarised the current Government’s policy regarding renewables as “unfriendly”,64 and it would be fair to say that this characterises the majority of evidence we received from the renewables industry. We look specifically at the Government’s decision to end support for onshore wind in more detail in the next section.
42.The Committee on Climate Change has recognised that recent policy changes by the UK Government will affect renewables projects in Scotland, with particular implications for the onshore wind industry, stating that:
a number of the projects with planning permission may not have finance in place as they cannot meet the deadline for the closure of the Renewables Obligation and have not yet secured a Contract for Difference. There is also greater uncertainty in investment in Scottish renewables following the announcement of subsidy cuts for onshore wind energy from April 2016. With 66% of planned onshore wind farms in the UK located in Scotland, this could have a greater impact on future development than for other areas of the UK.65
43.In terms of the direct impact on Scotland’s renewable industry, Scottish Renewables has estimated that early closure of the Renewables Obligation to onshore wind will cost Scotland up to £3 billion in lost investment and put 5,400 jobs at risk.66 Scottish Enterprise and the Independent Renewable Energy Generators Group have also argued that recent policy changes will limit the routes to market for renewable electricity projects, and stated that this will inevitably have a knock-on effect for jobs and the economy.67 Although the Government did undertake impact assessments of these policy changes,68 these did not consider the impact on Scotland, and the then Minister of State was unable to present us with any evidence that the Government had assessed the particular impact these changes would have on Scotland.
44.To mitigate the impact of the early closure of the Renewables Obligation to onshore wind and small scale solar PV, the Government has introduced grace periods for both technologies.69 ScottishPower Renewables welcomed the grace period for onshore wind, saying that this had softened “what would otherwise have been a shock”, and that the grace period applied to those projects which had seen most investment.70 Other submissions argued that the grace periods did not take into account the significant investment that may already have been made in projects which would not be covered.71 Concern about the scope of the grace periods is one of the key issues the Scottish Government raised in correspondence with UK ministers, ahead of the enactment of the Energy Act 2016.72
45.Another key feature in our evidence was that the suddenness of policy changes, the lack of consultation, and the lack of clarity about future policy had hurt investor confidence.73 We have been told time and again that investors require a stable policy framework in order to have the necessary confidence to invest, and that at present there is a cloud of uncertainty around support for renewables. This is illustrated by the UK’s fall from 8th to 11th place in the EY Renewable Energy Country Attractiveness Index, which ranks 40 countries according to the attractiveness of renewable energy investments. Along with many other witnesses, the Scottish Government expressed concerns about investor confidence in Scottish renewables. The Scottish Government Minister for Business, Innovation and Energy told us:
Industry respondents have highlighted that these uncertainties are leading to reduced investor confidence, cancellation or postponement of projects and, inevitably, to job losses. The Scottish Government have criticised some of the U-turns in UK energy policy by lobbying the UK Government and outlining that, above all else, the industry needs clarity of vision and stability of approach rather than recent examples of sudden policy changes—for example, the cancellation of the carbon catchment and storage competition without any warning.74
46.The evidence we have received reflects the view the Energy and Climate Change Committee came to in its Report on Investor confidence in the UK energy sector, which concluded that “the Government’s actions have clearly had an impact on the confidence of many investors”. That Committee concluded that several factors—sudden and numerous policy announcements, a lack of transparency in the decision-making process, insufficient consideration of investor impacts, policy inconsistency and contradictory approaches, lack of a long-term vision, and a policy “cliff-edge” in 2020—had resulted in a damaging effect on investor confidence, and that this could result in reduced investment in the UK’s energy sector.75 The Scottish Parliament’s Economy, Energy and Tourism Committee received similar evidence during a one-off evidence session it held into Renewable energy in Scotland.76
47.The Government’s recent changes to support for the renewable sector—early closure of the Renewables Obligation to onshore wind and solar, cuts to Feed-in-Tariffs and delaying the next round of Contracts for Difference—will affect the renewable industry across the UK. However, the fact that cuts fall particularly heavily on onshore wind, where the majority of capacity is deployed in Scotland, means that these changes will have a disproportionate impact on the prospects of Scotland’s renewable sector. Scottish Renewables told us that early closure of the Renewables Obligation to onshore wind will cost Scotland up to £3 billion in lost investment and put 5,400 jobs at risk. We have also heard that recent changes will mean Scotland could potentially lose out on significant additional investment and job creation. It is of serious concern that the UK Government implemented these changes without assessing the impact they would have on Scotland.
48.We recommend that the Government include in its response to this Report an assessment of the impact of recent policy changes on the renewable sector in Scotland, and that sector’s prospects for future growth, as compared to other parts of the UK.
Withdrawal of new subsidy for onshore wind
49.The UK Government had a clear manifesto commitment to “end any new public subsidy” for onshore wind,77 and the then Minister of State was clear that this was the basis for the early closure of the Renewables Obligation to onshore wind,78 but we have received some evidence questioning whether this commitment justifies the actions which the Government has taken to withdraw all public support from onshore wind.79 Several witnesses questioned whether the Government’s manifesto commitment could reasonably be taken to have indicated that support for onshore wind would be withdrawn early, by closing the Renewables Obligation to onshore wind in 2016 rather than 2017. Niall Stuart, Chief Executive of Scottish Renewables, told us:
The Conservative party manifesto if I remember correctly said, “We will end new subsidies to onshore wind”. That could have been done in many, many different ways. In fact, subsidies to onshore wind through the Renewables Obligation were due to finish anyway in 2017, so my understanding of a manifesto is that it is normally for a programme of Government and commitments are made for that five-year term of Government. I don’t think you can say that it was a clear statement of intention by the Conservative party that if they came into Government they would close the Renewables Obligation a year early because that is not what the wording in the manifesto said.80
50.We have also heard that the Government’s commitment to decarbonising electricity at the lowest price to the consumer is in conflict with its decision to end subsidies for onshore wind, which is one of the cheapest means of generating renewable electricity.81 Given the relatively low cost of onshore wind compared to other sources of renewable electricity, focusing funding on less developed technologies will increase the cost of increasing renewable generating capacity. The limit on the strike price (the sum renewable generators are guaranteed to receive for their electricity) for onshore wind in the first round of CfDs was £95/Mwh, and the onshore wind projects which were offered contracts actually came in at £79–82.50/Mwh.82 The Government has indicated that the limit for offshore wind will start at £105/Mwh, falling to £85/Mwh for projects commissioning by 2026.83 These limits are significantly lower than those offered to offshore wind in the first round of CfDs, which started at £155/Mwh.84 The offshore wind projects which received CfDs in the first round of allocations had strike prices of £119.89/Mwh and £114.39/Mwh.85
51.There has been some indication that the Government thinks onshore wind projects no longer need subsidy, and public support should therefore be focused on “those technologies that have not yet reached a point where they can stand on their own feet without subsidy”.86 However, it is widely acknowledged that no form of power plant is currently commercially viable without some form of public subsidy.87 The evidence we have received largely supports the view that no technology should receive subsidies for longer than necessary, but that the early end of subsidies to onshore wind will prevent the further deployment which is necessary to bring costs down to the point where the technology would be commercially viable without subsidy.88 The evidence is clear that cost reductions are best achieved by consistent support, and uncertain or delayed funding limits the opportunities for costs to be reduced.89
52.In addition to the early closure of the Renewables Obligation to onshore wind, the Government’s statement that there will be no more subsidies for onshore wind indicates that CfDs will not be available to onshore wind projects in the future. This decision was criticised by many of our witnesses, who argued that this meant there would be no route to market for onshore wind.90 Lindsay McQuade, Policy and Innovation Director at ScottishPower Renewables, told us they would like to see onshore wind continue to be a part of the CfD mechanism, as “we think it will deliver the best value for the consumer and it would ensure that the most cost-effective technologies can continue to deliver low carbon generation to the customers that are attached to the grid.”91
53.The then Minister of State told us that the Government had spent all it was prepared to on onshore wind, and is now focusing on other technologies,92 and Lord Dunlop, Parliamentary Under-Secretary of State at the Scotland Office said that this had been “very clearly signalled” in the Conservative manifesto.93 However, despite reiterating that the Government is “absolutely committed to no subsidies for onshore wind”, the Minister did not rule out the possibility of future CfDs being open to onshore wind, telling us that the Government “have not taken a decision on that as yet.” The Minister went on to say that the Government “are still considering whether there is any way that we can help the [onshore wind] industry but we have not made any decisions on that.”94 It is not clear what this “help” could be if it is not some form of public subsidy, although we have received several submissions calling for a “market stabilisation” mechanism which could guarantee a price for onshore wind but at a “subsidy-free” rate.95 Given that no form of power plant is currently investable on the basis of the wholesale electricity price alone, it is hard to imagine how any such mechanism could operate without, in effect, providing a subsidy.
54.We recognise that the Conservative Party had a clear manifesto commitment to “end any new public subsidy” to onshore wind, but the decision to close the Renewables Obligation—an already existing support mechanism, which was due to close to new entrants in 2017—to onshore wind a year early appears to go beyond this. It is not helpful that the Government has made significant changes to renewables policy, without consultation or engagement with the renewables industry, on the basis of a manifesto commitment which could have been implemented in any number of different ways.
55.Onshore wind farms are one of the cheapest means of generating renewable electricity, and the Government’s decision to deny any further subsidy to onshore wind therefore appears to be in conflict with the Government’s focus on reducing the costs of renewable technology, a principle the majority of our witnesses accepted. This decision will almost inevitably increase the costs of deploying additional renewable electricity generating capacity, and is likely to restrict the prospects of further reductions in the cost of onshore wind technology as new developments will have no realistic route to market.
56.We recommend that the Government review its decision to bar onshore wind schemes from accessing subsidies, and explain in its response to this Report how its decision to withdraw support for onshore wind, one of the cheapest forms of renewable energy, tallies with its commitment to keep down the costs of supporting renewable electricity.
57.The Government should also end uncertainty for the sector by saying whether onshore wind will be eligible for future rounds of Contracts for Difference, and set out its view on whether a “market stabilisation” mechanism for onshore wind could be introduced.
Future rounds of Contracts for Difference
58.The Government has faced significant criticism for the repeated delays and lack of clarity about future rounds of CfDs, and particularly the next round, which was originally intended to take place in 2015.96 Complainants have said that the absence of clarity about future funding means that investors have been unable to make decisions, and many projects have been put on hold. We have heard repeated calls for the Government to clearly set out its plans for future rounds of CfDs.97 The Government responded to these concerns to some extent in the 2016 Budget, delivered on 16 March 2016, where the Government set out the value of CfDs which would be offered this Parliament, but gave no details on timing and little indication of how the funding would be distributed between different technologies. The Budget stated:
The government is committed to driving down the costs of decarbonisation. Budget 2016 announces that the government will auction Contracts for Difference of up to £730 million this Parliament for up to 4 GigaWatts of offshore wind and other less established renewables, with a first auction of £290 million. Support for offshore wind will be capped initially at £105/MWh (in 2011–12 prices), falling to £85/MWh for projects commissioning by 2026. The government will continue to control costs on consumer bills–further details will be announced in the autumn.98
The then Minister subsequently told us that the first auction for this Parliament will be held in the last three months of 2016.99 The timing of the other two rounds to take place this Parliament is still not clear.
59.The information set out in the Budget has been welcomed by the renewables sector—for example, ScottishPower Renewables welcomed the information which has been provided about the three rounds of CfDs to be held this Parliament,100 and particularly the indication of support for offshore wind—but Scottish Renewables has said that despite the announcements made in the Budget, “there still remain a number of uncertainties for the renewable energy sector as a whole”.101 In particular, Scottish Renewables noted that the announcement gave no indication of whether established technologies such as onshore wind and solar PV would be eligible to bid for contracts. In addition, although the Government has stated that the next round of CfDs will be open to less developed technologies, it is still not clear precisely which technologies this will include.102 The then Minister of State told us: “we are finalising our decisions on what will be the less established technologies and how that auction in Q4 will work. That is something that we will be announcing in the near future.”103 It should be noted that the final guidance documentation for the first round of CfDs was only published a month before the auction was opened.104
60.It is regrettable that the second round of Contracts for Difference has been delayed by at least a year. This has created a void where renewables projects have been unable to progress because there is no support mechanism available to them. This stop-start funding is bad for investor confidence and for the maintenance of supply chains, which are most efficient when there is a stable policy framework and steady stream of support.
61.Although the Government has finally indicated that the next round of Contracts for Difference will be held in the last three months of 2016, there remain a number of important details to be confirmed. It is essential that the Government set out, at the earliest possible opportunity, the full details for the next round of Contracts for Difference. This should include the dates of the auction, eligible technologies and strike prices. The Government should indicate the timing of the remaining auctions due to take place this Parliament, ahead of providing more detailed information regarding funding levels and which technologies will be eligible for contracts.
Representation of Scottish interests
Consultation on changes to support for onshore wind
62.We have received evidence that there was an almost complete lack of consultation with the Scottish Government and Scottish industry on ending subsidies for onshore wind.105 The Scottish Government has been particularly critical of the UK’s decision to proceed with the withdrawal of support for onshore wind, given the significant presence of this sector in Scotland. We have seen correspondence from Scottish ministers to UK ministers which shows that the Scottish Government repeatedly raised concerns about the impact this change would have on Scotland’s renewable sector, and which makes it clear that the Scottish Government was not made aware of the proposal until it was reported in the press.106
63.It is also not clear what role the Scotland Office played in representing Scottish interests—one of the key purposes of that Department—on this issue. Several submissions we received questioned the Scotland Office’s role in recent policy changes,107 although others recognised that the Scotland Office had been helpful in promoting Scotland’s renewable sector.108 Lord Dunlop told us that the Scotland Office did facilitate engagement on the Government’s proposals,109 but was unable to tell us of any representations he had made to ministerial colleagues on behalf of Scotland’s renewable sector.
64.Scotland is home to around 60% of the UK’s onshore wind capacity, and withdrawing access to funding for future onshore wind developments will therefore have a disproportionate impact on Scotland. It is unclear to what extent the interests of Scotland’s renewable sector were considered by the UK Government when it formulated recent policy changes, but it is clear that the decision to bar onshore wind schemes from public support was pursued despite very clear opposition from the Scottish Government. It is not clear what, if any, role the Scotland Office played in representing Scottish interests within the UK Government in relation to a policy change which will have a significant impact on a key sector of the Scottish economy.
Improving engagement between the UK and Scottish governments
65.Although there are particular concerns about the extent to which Scottish interests were considered in relation to recent policy changes, and the degree to which the Scottish Government was consulted on these changes, engagement between the UK and Scottish governments on energy policy is a much wider issue. Several witnesses told us there needed to be better engagement between the UK and Scottish governments, particularly given the division of responsibility around renewables incentives, carbon emissions and planning.110
66.As we noted in the previous chapter, the scale of Scotland’s renewable sector means that it is important Scottish interests are taken into account in the development of policy which affects the renewable sector. Expanding on this point, Niall Stuart, Chief Executive of Scottish Renewables, told us:
The key thing for me is to come back to that statistic of Scotland providing 30% of the UK’s renewable electricity. By definition, it has a key role to play in the UK achieving its renewable energy targets. We would like a sense of a more joined up and shared sense of the challenges ahead and, therefore, a shared sense of the solutions that we are going to put in place to encourage and keep the momentum of the sector and continue the growth of the sector.111
He went on to say that he thought there needed to be a cultural shift in the UK Government’s coordination with the Scottish Government:
We would like to see Ministers from Scotland sitting round the table with Ministers from DECC agreeing the contribution that Scotland can make and how that is best achieved, because if the UK is to meet the levels of renewable deployment that we think are necessary to hit our future climate change targets—the agreement that was made in Paris last year—Scotland is going to have to make a disproportionate contribution.112
67.There is some evidence that the UK Government is changing how it engages with the Scottish Government on energy policy. The Smith Commission, established to agree new powers for Scotland following the referendum on Scottish independence, recommended that that the Scottish Government and Scottish Parliament have a formal consultative role in designing renewables incentives and the strategic priorities set out in the Energy Strategy and Policy Statement to which Ofgem must have due regard.113 The Scotland Act 2016 provided for the Scottish Government to be consulted on establishing a renewable electricity incentive scheme that applies in Scotland, or amending such a scheme as it relates to Scotland.114 The Government has stated that there “are already provisions concerning the consultation of Scottish Ministers on the Strategy and Policy Statement”, and that it will work with the Scottish Parliament and Scottish Government to devise a proportionate and workable method of consulting the Scottish Parliament on this.115
68.Several witnesses argued that the recommendations made by the Smith Commission did not appear to be reflected in recent policy changes.116 For example, the Scottish Council for Development and Industry stated that the process followed in relation to recent policy changes “showed that the Smith Commission’s recommendations have not yet been implemented effectively as there was very little meaningful consultation on the proposed changes to the Renewable Obligation and CfD for onshore renewables.”117 With a view to improving the representation of Scottish interests, the SCDI has called for the Scotland Office to play a more active role on renewables policy, telling us:
The Scotland Office should have an important role in ensuring that the needs and aspirations of the Scottish renewables sector, and the strong support for the development of the sector in Scotland, are understood and considered by the UK Government.118
69.The Scottish Government has clearly stated that it wants to work constructively with the UK Government to “get the best, cost-effective outcome for the industry and consumers, and ensure that the interests of Scotland are taken into account when making future decisions about support for renewables.”119 The Scottish Government Minister for Business, Innovation and Energy told us:
the Scottish Government are committed to working with the UK Government and Ofgem to deliver the strongest partnership possible to secure a thriving and equitable energy sector in Scotland. I want the UK Government to view us that way and to seek to collaborate with us better, perhaps, in order to achieve our transition towards a decarbonised economy. It is something that is in Scotland’s interests, surely, it is in the UK’s interests, and I would say it is in the global community’s interests as well.120
70.Lord Dunlop told us that now the Scotland Act 2016 had implemented the Smith Commission’s recommendations on “important energy-related powers”, he looked forward to implementation of the new devolution settlement.121 He went on to say that it was time to “put flesh on the bones” of the Smith Commission recommendations, and told us that the UK Government was determined to do that.122 However, when questioned about the role the Scottish Government would actually have under the new consultative process, Lord Dunlop said that “the Scottish Government is a very important interested party”, but that “ultimately” energy policy remained a reserved matter.123 It appears, from the evidence we received from Lord Dunlop, that despite the Scottish Government’s unhappiness with the way it was consulted ahead of the early withdrawal of subsidies to onshore wind, this process would have fulfilled the UK Government’s new obligation to consult the Scottish Government.
71.Given the significant interest Scotland has in UK energy policy, particularly where this affects the renewable sector, it is crucial that the UK and Scottish governments engage constructively on this subject. Both governments have acknowledged the need for improved engagement, and have committed to taking this forward. Lord Dunlop’s statement that it is now time to “put flesh on the bones” of the Smith Commission recommendations regarding consultation between the UK and Scottish governments on energy policy recognises that there is still work to be done on improving engagement between the two governments. This is also evidenced by the Scottish Government’s dissatisfaction with the way recent policy changes have been pursued. The two governments should be encouraged to take a constructive approach to discussions.
72.Although we welcome the implementation of the Smith Commission’s recommendation that the Scottish Government have a formal consultative role in designing renewables incentives, it is not clear what benefits this will have in practice. It is essential that the UK Government engage in substantive consultation with the Scottish Government when it comes to policy affecting the renewables sector, and that this is not simply conducted as a tick-box exercise.
73.We recommend that, to complement the provisions of the Scotland Act 2016, the UK Government put in place a clear process for consulting the Scottish Government on the design of, or amendment to, renewables incentives. We expect to see details of this process in the Government’s response, and will monitor how it works practice.
37 Department for Energy and Climate Change, Controlling the cost of renewable energy, July 2015
38 Q437
39 Q446
40 The Conservative Party, The Conservative Party Manifesto 2015
41 Department of Energy and Climate Change, Changes to onshore wind subsidies protect investment and get the best deal for bill payers, June 2015
42 Energy Act 2016, Sections 79–80
43 Department of Energy and Climate Change, Controlling the cost of renewable energy, July 2015
44 Department of Energy and Climate Change, Changes to financial support for solar PV, July 2015
46 Department of Energy and Climate Change, Controlling the cost of renewable energy, July 2015
47 Department of Energy and Climate Change, Consultation on a review of the Feed-in Tariffs scheme, August 2015
48 Department of Energy and Climate Change, Review of the Feed-in Tariffs Scheme: Government response, December 2015
49 Department of Energy and Climate Change, World-leading auctions to provide major green electricity boost, February 2015
50 Department of Energy and Climate Change, Electricity Market Reform: Contracts for Difference, February 2015
51 Department of Energy and Climate Change, Contracts for Difference (CFD) Allocation Round One Outcome, February 2015
52 Department of Energy and Climate Change, World-leading auctions to provide major green electricity boost, February 2015
53 edie.net, DECC postpones next Contracts for Difference auction, July 2015
54 Department of Energy and Climate Change, Amber Rudd’s speech on a new direction for UK energy policy, 18 November 2015
55 Green Highland Renewables Ltd (RSS0007), NFU Scotland (RSS0017), ABO Wind UK Limited (RSS0020), Scottish Council for Development and Industry (RSS0035), E3G (RSS0034), Scottish Government (RSS0047), Binn Group (RSS0053)
56 Q36
57 Q73
58 HM Treasury, Control framework for DECC levy-funded spending, March 2011
59 Energy and Climate Change Committee, Investor confidence in the UK energy sector, Third Report of Session 2015–16, HC 542
60 Q224, Bob Glen (RSS0004), COSLA (RSS0006), Green Highland Renewables Ltd (RSS0007), Scottish Renewables (RSS0018), Civil Engineering Contractors Association (RSS0019), ABO Wind UK Ltd (RSS0020), Comhairle nan Eilean Siar (RSS0022), Edinburgh Centre for Carbon Innovation (RSS0026), E.ON (RSS0029), RWE Innogy UK (RSS0030), Independent Renewable Energy Generators Group (RSS0031), Institution of Engineering and Technology (RSS0032), Scottish and Northern Ireland Plumbing Employers’ Federation (RSS0034), Stop Climate Chaos Scotland (RSS0037), Statkraft UK Ltd (RSS0038), Anaerobic Digestion and Bioresources Association (RSS0040), RSPB Scotland (RSS0041), E3G (RSS0044), Solar Trade Association (RSS0046), Scottish Government (RSS0047), Energy Saving Trust (RSS0048), Vattenfall (RSS0049), Binn Group (RSS0053), British Hydropower Association (RSS0054), Mackay Consultants (RSS0059), Nuclear Free Local Authorities Scotland (RSS0065), Viking Energy Shetland LLP (RSS0085)
61 Green Highland Renewables Ltd (RSS0007), Energy Saving Trust (RSS0048), British Hydropower Association (RSS0054)
62 Q428
64 Q71
65 Committee on Climate Change, The Fifth Carbon Budget, November 2015
66 Scottish Renewables, Early end of onshore wind support could cost £3bn investment in Scotland, June 2015
68 Department of Energy and Climate Change, Onshore wind: closure of renewables obligation on 31st March 2016, October 2015 Department of Energy and Climate Change, Government response on changes to financial support for solar PV projects at 5MW and below under the Renewables Obligation, December 2015, Department of Energy and Climate Change, Government response to consultation on a review of the Feed-in Tariff scheme, December 2015
69 Energy Act 2016, Section 80
70 Q324
73 Bob Glen (RSS0004), MEG Renewables (RSS0005), ABO Wind UK Limited (RSS0020), E.ON (RSS0029), Independent Renewable Energy Generators Group (RSS0031), Scottish Energy Association (RSS0033), Stop Climate Chaos Scotland (RSS0037), E3G (RSS0044), Scottish Government (RSS0047), Vattenfall (RSS0049), Binn Group (RSS0053), Mackay Consultants (RSS0059)
74 Q401
75 Energy and Climate Change Committee, Investor confidence in the UK energy sector, Third Report of Session 2015–16, HC 542
76 Scottish Parliament, Economy, Energy and Tourism Committee, Renewable energy in Scotland, 9 December 2015
77 The Conservative Party, The Conservative Party Manifesto 2015
78 Q445
79 Qq7, 72, 232
80 Q7
82 Department of Energy and Climate Change, Contract for Difference: Final allocation framework for the October 2014 allocation round, October 2014, Department of Energy and Climate Change, Contracts for Difference (CFD) Allocation Round One Outcome, February 2015
83 HM Treasury, Budget 2016, March 2016
84 Department of Energy and Climate Change, Contract for Difference: Final allocation framework for the October 2014 allocation round, October 2014
85 Department of Energy and Climate Change, Contracts for Difference (CFD) Allocation Round One Outcome, February 2015
86 Q442
87 Department of Energy and Climate Change, Amber Rudd’s speech on a new direction for UK energy policy, November 2015
88 Independent Renewable Energy Generators Group (RSS0031), Statkraft UK Ltd (RSS0038), ScottishPower (RSS0051)
89 Q228
90 Scottish Renewables (RSS0018), RWE Innogy UK (RSS0030), Independent Renewable Energy Generators Group (RSS0031), Vattenfall (RSS0049)
91 Q327
92 Q519
93 Q456
94 Q479
97 Q20, WWF Scotland (RSS0016), Scottish Renewables (RSS0018), Independent Renewable Energy Generators Group (RSS0031), Scottish Council for Development and Industry (RSS0035)
98 HM Treasury, Budget 2016, March 2016, para 1.246
99 Q442
100 Q331
103 Q495
104 Department of Energy and Climate Change, Electricity Market Reform: Contracts for Difference, September 2014
105 Scottish Council for Development and Industry (RSS0035), E3G (RSS0044), Scottish Government (RSS0047)
107 Scottish Renewables (RSS0018), ABO Wind UK Ltd (RSS0020), British Hydropower Association (RSS0054)
108 Anaerobic Digestion and Bioresources Association (RSS0040), ScottishPower (RSS0051), Binn Group (RSS0053), Viking Energy Shetland LLP (RSS0085)
109 Q456
110 Scottish Renewables (RSS0018), Scottish Council for Development and Industry (RSS0035), Statkraft UK Ltd (RSS0038)
111 Q29
112 Q30
113 The Smith Commission, Report of the Smith Commission for further devolution of powers to the Scottish Parliament, November 2014
114 Scotland Act 2016, Section 61
115 HM Government, Scotland in the United Kingdom: An enduring settlement, January 2015
116 MEG Renewables (RSS0005), ABO Wind UK Limited (RSS0020), RWE Innogy UK (RSS0030), Scottish Council for Development and Industry (RSS0035), Vattenfall (RSS0049), Binn Group (RSS0053), British Hydropower Association (RSS0054)
120 Q401
121 Q437
122 Q475
123 Q476
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20 July 2016