A “loophole” that allows some wind power schemes to claim overly generous subsidies is costing consumers hundreds of millions of pounds, a new report claims. This money could be spent on providing more clean energy.
Under the “feed-in tariff” payments system for small-scale wind schemes, some operators are deliberately reducing the output from larger turbines to qualify for more generous subsidy payments meant for smaller turbines, says the study by think-tank IPPR (Institute for Public Policy Research), an independent registered charity.
The study continues to say that the practice could be committing consumers – who pay for the feed-in tariff payments in their bills – to paying out £400 million in excess subsidies that could be going to support more low-carbon energy generation.
Labelling turbines as having a lower capacity than they do, a practice known as “de-rating”, is reportedly easy to do in a system with a lack of scrutiny and means investors could be receiving as much as £100,000 a year in excess subsidies for each turbine, IPPR said.
The practice has become widespread among the operators of schemes with only one or two turbines. This leads to unnecessarily large wind turbines which are not generating as much electricity as they could, the think-tank claimed.
It also threatens to undermine support for the onshore wind sector, IPPR researchers said, as they accused the Government of failing to take action to address the issue.
IPPR called for moves to close the loophole, including a short-term cap on the rotor size of turbines seeking the more generous subsidy rates and longer-term changes to the scheme.
Joss Garman, IPPR senior research fellow, said, “This loophole is short-changing bill payers to the tune of millions of pounds a year. Ministers should act immediately to close down what is becoming a ‘feed-in frenzy’. It is distorting the energy market, lining the pockets of investors and undermining public confidence in Britain’s vital clean energy sector.”
Charles Ogilvie, energy consultant and co-author of the report, added, “The feed-in tariff should be driving innovation to create a sustainable, broad base of renewable energy for the UK. By leaving loopholes like this open for so long, the Government is effectively squandering support for the innovators and entrepreneurs who play by the rules.”
Wind industry body RenewableUK's deputy chief executive, Maf Smith, said operators adhered to the rules drawn up by Ofgem and the Department of Energy and Climate Change.
“De-rating is a complex issue,” Smith said. “For example, it may be necessary because of limits in the capacity of the grid to cope with the amount of electricity that’s being generated, or because a site where the wind is lower needs a turbine with longer blades to make the best use of it.”
Mr Smith also insisted that de-rated turbines did not cost consumers more money as the feed-in tariff budget was capped by the Government. “We want to work with Government and the regulator to make the most of the UK's exceptional wind resource and ensure that small businesses and individuals are encouraged to generate clean energy,” he added.
A spokeswoman from the Department of Energy and Climate Change commented on the report, saying, “This report is based on incorrect and second-hand information. The numbers just don't add up. We keep this issue under constant review to make sure consumers are getting the best possible deal and an in-depth investigation is currently under way. We will take any action necessary if wind developers are found to be unfairly exploiting the feed-in tariff scheme.”