UK govt failed to secure best value for money with low-carbon support

The budget for the levy control framework (LCF), through which the UK government supports low-carbon energy, has been spent early and without price competition, not securing best value for money.

This is one of the conclusions in a report by the National Audit Office (NAO), released today. It says that the support schemes for low-carbon energy generation covered by the LCF are expected to exceed the GBP-7.6-billion (USD 9.3bn/EUR 8.4bn) cap in 2020-21 and cost GBP 8.7 billion. These schemes are the now-discontinued Renewables Obligation (RO), the much-reduced Feed-in Tariffs (FiTs) and the newer Contracts for Difference (CfDs).

“[..] weaknesses in forecasting and in [the government’s] approach to allocating the Framework budget up until April 2015 have resulted in a situation in which there is little unallocated budget left for new projects between now and 2020-21,” the NAO says. It added that as renewables costs keep falling, holding back more of the LCF budget and allocating it later would have been more cost-effective.

The report has found that the LCF has not met its potential to support investor confidence due to the short and decreasing timeframe and the lack of transparency over forecasts and how the budgetary cap would operate. Though the department in charge of energy has given some details on the future support amounts available, there are many questions that have been left unanswered, such as whether biomass projects will be given a budget to bid for and whether planned wind farms in Shetland, Orkney and the Western Isles, which the energy department previously proposed to treat as a “new and innovative technology”, will be able to compete for support. Also, the government has neither ruled in nor ruled out holding additional CfD auctions for established technologies such as solar.

In July the UK Department of Energy and Climate Change (DECC) was merged with the Department for Business, Innovation and Skills (BIS) to form the Department for Business, Energy and Industrial Strategy (BEIS).

The next and much-delayed CfD auction is expected in 2017.

(GBP 1 = USD 1.22/EUR 1.11)

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