* Renewables spend to rise to 7.6 bln stg a year in real
* To spur 40 bln stg of private investment, create jobs
* Renewables to provide 30 pct of energy mix by 2020
By Oleg Vukmanovic and Karolin Schaps
LONDON, Nov 23 Britain will triple subsidies for
low-carbon power generation by 2020 after its coalition
government this week forged a compromise over how to fund wind
farms without harming the future of gas-fired power.
The compromise became possible after the government agreed
to postpone until 2016 setting a target for decarbonisation,
which was opposed by many members of Prime Minister David
Cameron's Conservative Party. The target is the extent to which
carbon emissions are to be reduced by 2030.
The deal is expected to boost the share of renewables in
Britain's energy mix to 30 percent by 2020, outpacing European
Union targets of 20 percent, and create thousands of new jobs.
"Today we've reached a landmark agreement on energy policy
that's going to deliver a clear, durable signal to investors,"
Cameron's spokeswoman said.
Under the agreed Levy Control Framework, spending on
renewable power generation will increase to 7.6 billion pounds
($12 billion) a year in real terms by 2020, from the current
2.35 billion pounds, to reduce dependence on gas.
The renewable spending plans will be funded through further
rises in household energy bills, which are increasingly
unaffordable for many consumers.
Responding to criticism from the British media, Cameron's
spokeswoman said the shift toward renewable energy was not the
main contributor to higher energy bills, which she said was due
to high gas prices and infrastructure investment.
"While the proportion of people's bills will slightly
increase in terms of the green aspects, actually when it comes
to 2020, the net impact will be that people's bills will fall,"
Others were less convinced.
"The proposals are very negative for consumers," Liberium
Capital, a London-based investment bank said.
"At face value a 7.5 billion pounds nominal rise in low
carbon support could equate to an 80 pounds (20 percent) per
household bill increase," it said.
Renewable spending will be focused on rewarding low-carbon
power producers like renewables, nuclear and fossil fuel plants
fitted with carbon capture and storage technology, a Department
of Energy and Climate Change (DECC) spokesman said.
Divisions over spending plans between energy minister Ed
Davey and finance minister George Osborne have delayed key
agreements over energy policy at a time of painful austerity
measures introduced by the government.
NEW JOBS, INVESTMENT
The new agreement paves the way for the introduction of the
Electricity Market Reform (EMR) Bill next week.
Industry group RenewableUK said the plans would create tens
of thousands of jobs, bring forward at least 40 billion pounds
of private sector investment and allow for a massive expansion
of the UK's renewable energy sector.
"The government needs to maintain this momentum in the
forthcoming Energy Bill (or EMR)," Renewable UK's Chief
Executive Maria McCaffrey said.
"Those investors put 2.5 billion pounds into the industry
this year - this will now increase exponentially," she added.
The extra investment announced on Friday will see
renewables' share of the energy mix rise from 11 percent now,
driven primarily by the 31 gigawatts of wind energy to be
installed by 2020.
The spending increase will also help to support new nuclear
power and the commercial use of untested carbon capture and
storage technologies, the government said.
"This is a durable agreement across the coalition
(government), against which companies can invest and support
jobs and our economic recovery," Davey said in a statement.
However, environmental group WWF said the postponement in
setting a decarbonisation target represented a failure of
"Having a 2030 decarbonisation target is nothing that Mr
Cameron's government should be afraid of, given that it is a key
requirement to deliver the legally binding Climate Change Act
commitments, which Mr Cameron played such a key part in
delivering," WWF's David Nussbaum said.
Nussbaum added that engineering companies such as Spain's
Gamesa and Germany's Siemens, who want to
invest in the UK's renewable supply chain, need clear long-term
government commitments before entering the market.
Reforms are required to attract the 110 billion pounds of
low-carbon energy investment that the government says is needed
to replace ageing electricity plants fuelled by gas, coal and
nuclear, up to a fifth of which face retirement this decade.
However, the EMR bill could be a boon for the gas industry.
"EMR is obviously focused on low carbon, but today's
announcements give as much to gas-fired generation as to
renewables and nuclear," said Ben Stansfield, senior associate
specialising in energy at law firm Clifford Chance.
The government on Friday committed to establishing a system
whereby backup power plants, mainly gas-fired, are paid to be
ready to fill supply gaps created when the wind does not blow or
demand rises during peak time.
Auctions for backup power plant operators will start in 2014
to provide backup capacity in 2018/19, the government said.