The Government has announced the much awaited outcome of the Renewables Obligation Banding Review, which includes the anticipated reduction in the ROC per MWh allocation for onshore wind by 10% to 0.9 ROCs per MWh from 1 April 2013 to 31 March 2017 for new accreditations and additional capacity.

This is in line with the Scottish Government’s intentions announced on the 23 July 2012 to “amend the onshore wind ROC band to 0.9 with effect from April 2013”. In an open letter to UK Secretary of State for Energy & Climate Change Ed Davey, Scotland’s First Minister had urged the Government to do likewise and reassure investors.

No doubt the Government hopes that yesterday’s announcement will maintain a stable regime for investing in renewable generation going forward and has suggested that it will encourage up to £25bn in new investment (generation and networks) between 2013 and 2017.

However, the Government has also advised that a further call for evidence relating to onshore wind costs will be launched this Autumn to report in early 2013. This may herald further changes to the support level for onshore wind with effect from March 2014 if its findings identify a significant change in those costs. The Government has made it clear that renewables cannot be supported whatever the cost. However, a key factor to maintain investor confidence is that future banding reviews must be evidence based and be signalled sufficiently far in advance.

Other changes to the Renewables Obligation regime highlighted in the Government’s announcement are:

• Reduction in technology costs for offshore wind over this decade allowing a corresponding reduction in ROC support (2 ROCS/MWh for new accreditations and additional capacity in 2014-2015 reducing to 1.9 ROCs/MWh and 1.8 ROCs/MWh for new accreditations and additional capacity in the following two years);

• Support levels for certain marine energy technologies will increase from 2 ROCs to 5 ROCs per MWh, subject to a per generating station limit of 30 MW;

• A new band to support existing coal plant converting to sustainable biomass fuels will be introduced; and

• There will be no immediate reduction in support for large-scale solar PV. However, there will be a further consultation this year to investigate whether in light of “recent dramatic falls in costs” there should be reduced ROC support for solar PV projects that accredit or add capacity on or after 1 April 2013.

It is interesting that, in the RO Banding announcement, the Government has also chosen to express support for gas fired generation, branding it as “lower carbon” and stressing that it will continue to have a significant role in the energy mix (not merely as back-up to intermittent wind generation).

The RO Banding statement also states that the Government is committed to making the best use of UK gas reserves including the development of unconventional gas (eg shale gas) subject to appropriate safeguards being in place. A key message is that if gas prices fall, Government wants UK consumers to be able to benefit through lower energy bills. The Government will publish its Gas Generation Strategy in the Autumn.

The much publicised hiatus in the timing of the ROC banding announcement highlights the difficult “energy trilema” faced by Government, namely how to balance: security of supply; climate change targets; and consumers’ energy bills. You can’t please everybody all of the time!