UK ministers have decided to ‘rebalance’ government energy subsidies by reducing funding to onshore projects while increasing funding offshore. The announcement came just ahead of George Osborne's Autumn Statement, which was delivered on December 5.
Offshore wind power will be the big winner via increased subsidies, while onshore solar and wind projects will receive less funding. Overall, the total amount spent on government energy subsidies will remain the same. Ministers claimed the shifting of monies is nothing more than a rebalancing based on priorities.
The ministers claim that onshore wind and solar projects no longer need as much money due, in part, to the rather large subsidies they have been receiving all along. Ministers believe they can now get along with less. Offshore wind production is another matter.
The government believes that in order to spur more offshore wind activity, greater subsidies are needed. These types of projects are inherently more expensive because designing, installing and maintaining turbines is more difficult on water. The government believes offsetting some of the costs will encourage companies to get involved in offshore wind projects.
Critics of the move obviously disagree. One of their main complaints is that cutting subsidies to onshore projects is being done before both wind and solar power production has reached maturity. They fear that the loss of subsidies will mean some projects never reach maturity.
Some have even gone so far as to say the subsidy cuts marked the beginning of the end for large-scale renewable energy production in the UK. That sounds a bit overreaching, but the underlying point is a valid one. Renewable energy is difficult to make profitable without government subsidies. For right or wrong, reducing subsidies for onshore products will affect future decisions by companies thinking of investing in it.