Bloomberg News

Davey Signals U.K. to Maintain Support for Clean-Energy Subsidy

July 11, 2012

U.K. Energy Secretary Ed Davey said arguments against pushing renewable energy policies are “dangerous” for the economy, signaling he’s resisting pressure from within the government to cut subsidies for the industry.

“Too often, we are told that those who go low-carbon first will sacrifice their competitiveness,” the Cabinet minister said in a speech in London today. “This is misleading and dangerous.”

Davey, who’s planning to announce changes to subsidy levels for renewables from wind to biomass later this month, said he’ll listen to evidence given about how best to shape the so-called green economy. He said the industry is worth 122 billion pounds ($189 billion) to the U.K., contributing 5 billion pounds to exports last year and perhaps enough to halve the trade deficit before the next election.

The comments ease concerns that the government will slash support for wind power in a review of outlays under the Renewable Obligation Certificate program due to be published before Parliament rises for its summer recess on July 17. Chancellor of the Exchequer George Osborne, a Conservative coalition member, has called for the government to move slower on low-carbon initiatives, saying they’re hurting industry.

The bulk of Davey’s speech was about climate change and the U.K.’s strategy for the annual United Nations global-warming talks, starting in November in Qatar. He didn’t give details about the subsidy review or mention the ROC program.

Davey, whose Liberal Democrat party has put clean energy at the heart of its policies, voiced support for the industry and rejected suggestions that there’s a trade off between economic growth and pollution limits.

Green Growth

“The real danger is not going green, but being outpaced by our competitors,” Davey said, noting that South Korea is spending 2 percent of gross domestic product on “green growth” initiatives.

“Around the world, the countries who are most competitive are the ones who are investing the most in low-carbon,” he said.

His comments embraced research from the Confederation of British Industry, which last week said the U.K. may earn 20 billion pounds a year from clean-energy products. The business lobby group criticized the government for sending mixed signals regarding its support for renewable, both encouraging investment and cutting subsidies for solar installations.

Planned Reduction

The government already has said it’s considering a 10 percent reduction in subsidies for onshore wind developments. The industry’s lobby group said it’s concerned ministers may make a political decision to make a deeper cut.

Gaynor Hartnell, chief executive officer of the Renewable Energy Association, said she would be “surprised if the government departed from” its proposal to cut the subsidy to 0.9 ROCs.

“Clearly an evidence based approach is what’s needed to maintain confidence of the industry,” she said in a telephone interview today. “This government must know this country needs onshore wind energy to meet climate targets.”

Davey cited the CBI’s research about the value of renewables for the economy and said ministers would pay careful attention to the recommendations during a consultation on the subsidy levels.

“The critical thing for me is that we must follow the evidence,” Davey said in response to a question after the speech. “When we are trying to attract investment to the country, investors can rely on the government not to act capriciously and to focus on the evidence. And that is what we are going to do.”

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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