LONDON Britain proposed to more than double financial support for its nascent marine energy industry on Thursday as well as provide additional subsidies for biomass generation, while cutting rates for more mature technologies such as wind and hydro power.
The policy changes lifted share prices at biomass developer Drax as high as nearly 16 percent, while prompting utility Centrica to say it would put two offshore wind projects under review.
"Where new technologies desperately need help to reach the market, such as wave and tidal, we're increasing support. But where market costs have come down or will come down, we're reducing the subsidy," said Energy and Climate Change Secretary Chris Huhne.
Britain sees its growing marine energy industry as a key technology to become a clean technology leader, an ambition that was undermined on Wednesday when the government said it had dropped funding for its first carbon capture and storage (CCS) project.
Tidal stream and wave energy projects of up to 30 megawatts (MW) will receive five so-called Renewable Obligation Certificates (ROCs) per megawatt-hour (MWh) from April 1, 2013 per year, compared with two currently.
ROCs allow project operators to collect a support fee for generating green power, on top of wholesale power prices, which is eventually paid by the energy consumer.
"This decision will ensure that the marine energy industry can begin to move toward commercial scale exploitation and that the UK can retain its position as a global leader," said Andrew Tyler, the developer of the world's only operational full-scale commercial tidal current turbine located in Northern Ireland.
Developers of biomass plants, such as Britain's Drax and GDF Suez's International Power have been eagerly awaiting the review.
Thursday's proposals create a new band for enhanced co-fired biomass/coal plants, which will be rewarded one ROC per MWh pr year, while annual rewards for existing co-firing will remain at 0.5 ROC.
"The proposed level of 1.0 ROC/MWh for enhanced co-firing will enable us to increase our co-firing, but we would need a moderate uplift to maximize our potential for producing this low-cost renewable electricity," said Dorothy Thompson, chief executive of Drax, whose shares were up 9.7 percent at 1518 GMT.
The government said the steady power generation nature of biomass was a benefit as a renewable energy source that comes without the intermittency that creates challenges in the management of wind and solar power.
WIND, HYDRO SUPPORT CUT
Onshore wind farms and hydro installations have seen stronger growth in the UK, and the government concluded that cutting support rates would not adversely affect them.
Hydro power annual support levels are proposed to be halved to 0.5 ROC, and onshore wind would see a 10 percent cut to 0.9 ROC. Support levels for offshore wind will fall 10 percent below current figures to 1.8 ROCs in 2016/17.
"The proposal to reduce the support mechanism for offshore wind and other technologies means we need to re-examine the economics of the projects we have in our planning pipeline, including our next two offshore wind projects," said Mark Hanafin, managing director at Centrica Energy.
The projects under review are the Race Bank and Docking Shoal offshore wind farms with a combined capacity of 1,000 MW, a spokesman said.
The review proposals are open to consultation until Jan 12, 2012.
The new green energy support proposals will add 50 pounds ($79.16) on average to British energy bills in 2016, compared with 52 pounds if no changes were made, the government said.
The buyout price per ROC in 2011-12 is set at 38.69 pounds.
The government expects to see 70-75 TWh of renewable electricity output in the UK by 2017. Renewable energy accounted for 54 TWh (3.3 percent) of the UK's total energy consumption in 2010, having increased by 15 percent between 2008 and 2009, according to the Department of Energy and Climate Change.
Britain has a target to generate 15 percent of its energy consumption from renewable sources by 2020, compared with 7.4 percent reached in 2010. ($1 = 0.632 British Pounds)
(Additional reporting by Adveith Nair; editing by Jane Baird)