Monday, 14 September 2021 09:21

Windfarm subsidy cuts having “significant impact” on investment

Windfarm subsidy cuts having “significant impact” on investment

New research from industry body Scottish Renewables has found that the early end to renewables subsidies is already having a “significant impact” on investor confidence and their ability to lend to developers.

Earlier this year, the UK Government announced it is to end the Renewables Obligation (RO) in 2016, rather than the previously-planned 2017.

A survey carried out by EY, on behalf of Scottish Renewables, has found that many of the industry’s concerns have been confirmed and that banks have become reluctant to finance wind farm projects as a result of the support scheme ending.

More than half of the active onshore wind investors questioned said they were not prepared to lend until the UK Energy Bill had received Royal Assent, which is expected next year. This is due to the current political and regulatory risk surrounding the RO, and the lack of guidance on the process.

Michael Rieley, senior policy manager for Scottish Renewables, said: “The UK Government’s decision to remove financial support for some onshore wind farms a year earlier than planned has had a clear and negative impact on the ability of developers to attract finance to their projects.

“Our members have already expressed concern that they were entering an investment hiatus and this survey of lenders would indicate their suspicions are well founded. With the decision to end support a year earlier than planned, around two gigawatts of onshore wind projects in Scotland have been put at risk. These are projects that could bring around £3billion pounds of investment and provide enough generation to meet the equivalent electricity demand of 1.2 million Scottish homes.

“If we are to avoid losing the benefits of this scale of development in Scotland, the UK Government must allow those developers that have already made significant progress with their projects to continue them as part of the RO scheme.”

Matthew Yard, assistant director at EY, added: “The results of the survey indicate that raising project finance for UK onshore wind RO projects has become more complex, more expensive and increasingly difficult since the announcement of the early closure of the RO. Those banks that have indicated they are considering lending to UK onshore wind RO projects are now seeking better terms and some form of mitigation against a situation with no RO revenue.

“As we move closer to the RO accreditation end date, the ongoing uncertainty makes it harder for projects and sponsors to raise senior finance.”

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