LONDON (Reuters) - Britain set out a 5-year plan on Tuesday to unlock the solar and biomass investment needed to achieve the country's 2020 green energy targets.
The Department of Energy and Climate Change (DECC) sought to give investors the certainty they need to build new solar and biomass power plants by deciding subsidy levels over the 2013-2017 period.
Support levels for the solar photovoltaic (PV) industry, while higher than initial proposals made by the government in September, will be cut by 20 percent from current levels starting in April 2013, when the new scheme takes effect.
The government won praise from developers of biomass projects who welcomed its decision to relax its original plan to cap subsidies once dedicated capacity exceeded 400 megawatts (MW).
The government expects the move to mobilize at least 600 million pounds ($975 million) in biomass projects - burning material like straw and sawdust to generate power - while one developer said it could unlock billions of pounds of new investment
Britain's subsidies are aimed at helping it meet targets to derive 15 percent of its energy demand from renewable sources by 2020 and reduce carbon output.
Economic difficulties have however put pressure on renewable support schemes as government departments rein in spending, while falling costs of technology mean that less support is required to encourage take-up.
Solar installations mounted on buildings will more support than panels at ground level, according to the subsidy scheme set out by DECC.
"This will encourage the installation of solar projects at large factory or warehouse buildings," it said.
The rate of reductions to solar subsidies will mostly be slower than previously indicated, although the government remains committed to reducing subsidies over time.
The Solar Trade Association, while welcoming aspects of the plan, said that the subsidies for ground-level solar in 2013 were inadequate and this may constrain future deployment.
The decision by DECC to loosen a cap on biomass subsidies was welcomed by industry bodies and developers.
"The government has gone from what was a hard, firm legal cap to a softer, non-legislative cap," said Peter Dickson, technical director at BNP Paribas Clean Energy, which plans to build a 38-MW straw-fired plant in Sleaford, England.
Dickson said the initial cap proposal had been "draconian, unduly restrictive and short-sighted," and looked set to discourage biomass investment beyond what was already in the works.
"This country needs to attract billions of pounds of investment to ensure Britain's power generating infrastructure is fit for purpose and declaring biomass alive and well is a valuable first step," he said.
The government will provide the subsidies in the form of Renewable Obligation Certificates (ROC), which renewable energy producers can use to claim back money at a buy-out value of 40.71 pounds ($66.14) per ROC for the 2012-13 period, for example.
DECC will guarantee support for new biomass plants at 1.5 ROCs per megawatt-hour produced until overall dedicated capacity hits the 400 MW cap, and will review procedures thereafter.
That drops to 1.4 ROCs per megawatt-hour after March 31 2016, it said, in case the cap is not breached by then.
Support for biomass projects under this Renewable Obligation scheme could unlock 600 million pounds ($972 million) worth of investment and create 1,000 construction jobs, DECC said.
"Biomass will make a significant contribution as we seek to increase the amount of cost-effective, low carbon renewable power in our energy mix," Energy and Climate Change Secretary Ed Davey said in a statement.
"The support we are setting out today will bring new investment into the economy and create new jobs," Davey said. ($1 = 0.6173 British pounds)($1 = 0.6155 British pounds)
Reporting by Oleg Vukmanovic; Editing by Anthony Barker