Posted on: 12/01/2016
Former Energy Secretary Sir Ed Davey has accused the Conservative government of “butchering” the UK renewable energy industry.
Davey, who served during the 2010-15 Conservative-Liberal Democrat coalition government, criticised cuts to renewables subsidies.
His successor, Amber Rudd, has said that subsidies needed to be reduced to prevent an over-spend in the Levy Control Framework (LCF), the mechanism designed to cap the amount by which consumers subsidies renewables through their energy bills.
The LCF was designed to cap subsidies at £7.6 billion in 2020-21, but the Office for Budget Responsibility (OBR) estimated that the total would hit £9.1bn.
‘Alice in Wonderland’ economics
Davey said: “How the alleged overspend on the LCF was calculated unfortunately remains a mystery.
“The scandalous lack of openness and transparency on that crucial calculation means the Conservatives are decimating a whole industry, with no convincing hard evidence to justify their decisions.
“I told [George] Osborne we needed an LCF where investment spend was robust to short-term fluctuations in wholesale fossil fuel prices. He wouldn’t accept our plans to design out the problem, but agreed instead to a 20% contingency above the levy control ceiling, if wholesale prices turned out lower than expected.
“Now that they have, and because Lib Dems aren’t there to keep them honest, the Conservatives are failing to use that contingency. This is Alice in Wonderland economics, which is butchering the UK’s successful renewables industry.”
His comments came as the Department of Energy & Climate Change (DECC) and the Treasury released emails to the Carbon Brief website through a request made under the Freedom of Information Act.
The emails revealed that £500 million of the OBR’s predicted £1.5bn over-spend is due to lower wholesale energy prices caused by falling fossil fuel costs.
Lower wholesale costs mean higher subsidy payments for some renewables.
Government officials expect average household energy bills will stand at £1,222 in 2020, £97 or 7% lower than previous estimates.
> Read Carbon Brief's article