First, investors were worried that Germany would not be able to finance the “greening” of its electrical grid, and now there are worries the U.K. is taking on too much debt to finance its own green-energy revolution.
The U.K. Independent reports the government is “facing a multi-billion pound black hole in its budget to pay for new clean energy supplies” that are threatening to raise energy prices and cause instability in the power grid. Sources told the newspaper that “the Department of Energy and Climate Change has already overspent its budget by £1.5bn [about $2.3 billion] to support renewable energy projects over the next five years.”
“Unless more money can be found, key projects such as carbon capture and storage, as well as the future of new offshore wind farms, could be placed in jeopardy,” the Independent reports.
The dire news comes after Prime Minister David Cameron’s Conservative government eliminated subsidies for onshore wind power farms — a move that means virtually no new wind farms will be built, as they relied so much on government support.
U.K. Energy Secretary Amber Rudd recently told reporters that some 250 wind energy projects were “unlikely to be built” due to the subsidy cuts, which “will save hundreds of millions of pounds” for taxpayers.
“That equates to about 250 projects, totaling about 2,500 turbines, that are unlikely to be built,” Rudd said. “The onshore wind projects that are unlikely to go ahead could have cost hundreds of millions of pounds.”
But the cuts to wind subsidies undergirds more serious problems for the U.K.’s energy security. Green energy subsidies and global warming regulations forced cheaper coal-fired power plants to shut down. Green subsidies have also caused household energy bills to rise, with even greater rises projected in the future if the government opts to meet European Union-mandated global warming goals.
The Independent reports that government projections show “the total additional costs added to an average household’s electricity bill to pay for the green schemes are already due to rise from £89-a-year to £188 by 2020.” That’s almost $300 a year to pay for solar and wind power on top of what people actually owe for using electricity.
The U.K.-based think tank Policy Exchange reports that if overspending on green energy continues, Brits could be paying up to £210 per year, or about $330, on green subsidies.
“For a while investors thought the U.K. was different, but this was just a matter of timing,” according to an analysis by the Jefferies, a financial research firm. “The U.K.’s transformation program has been running several years behind most other E.U. countries and therefore the point at which the inevitable affordability crises hit was also delayed.”
“On the generation side the U.K. is now in a position whereby not a single MW of capacity can be built without the government under-pinning the economics through one of the myriad of subsidy/support mechanisms that now totally dominate investment decision process,” Jefferies warned.
“A small group of civil servants now decide what power stations get built, using which technology, where they are built, and when they will commission,” the equity firm reported. “The U.K. now has a level of central planning in power generation that arguably exceeds that seen when the industry was actually nationalized.”
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