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The Committee of Public Accounts has published a report on government funding for renewable energy technologies

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“Given the urgency and importance of the issue, progress in meeting renewable energy targets has been unacceptably slow over the last decade. Ten years ago, the proportion of the UK’s electricity supplied from renewable sources stood at 2.7 per cent. By 2009 it was just 6.7 per cent, well short of the Department’s target to generate 10 per cent by the end of 2010. And some £180 million of the funds allocated to support renewable energy technologies had gone unspent.

“New, and substantially more demanding, targets are now in place. The Department will have to have a greater sense of urgency and purpose if it is to achieve the dramatic increase in renewable energy supplies needed to meet them.

“We are concerned that the Department agreed to the legally binding EU-target to supply 15 per cent of the UK’s energy from renewable sources by 2020, without clear plans, targets for each renewable energy technology, estimates of funding required or understanding how the rate at which planning applications for onshore wind turbines were being rejected might affect progress.

“As for meeting the longer-term 2050 target to reduce greenhouse gas emissions by 80 per cent, the Department has yet to set out the timescale against which innovations in renewable energy technology will be required.”

Margaret Hodge was speaking as the Committee published its 7th Report of this Session which, on the basis of evidence from the Department of Energy and Climate Change (the Department), examined government funding for the development of renewable energy technologies.

Developing renewable energy technologies is vitally important if the UK is to help tackle climate change and maintain secure national energy supplies. The Department told us, however, that it is going to miss its target to supply 10% of electricity from renewable sources by the end of 2010. The Department and its predecessors had not done enough to address the slow progress in increasing the supply of renewable energy. As a result, it does not expect to meet the 10% target until 2012, from a starting position of 2.7% in 2000.

The Department is responsible for ensuring a series of targets are met over the next 40 years but direct government funding for developing renewable energy technologies is delivered through a complex web of organisations that the Department does not control. In consequence the Department does not have a clear understanding of how much has been spent or what has been achieved. Between 2000 and 2009, the Department and its predecessors failed to use nearly half of the resources available to it to encourage innovation in renewable energy. This is a wasted opportunity for providing investment that could have helped increase the supply of renewable energy.

We are concerned that the Department committed to a new, extremely ambitious and legally-binding EU target to supply 15% of all the UK’s energy from renewable sources by 2020, despite not having a clear plan for how it would achieve this. The Renewables Obligation provides the major subsidy for renewable energy. The Department needs to get the best value and impacts from this funding framework. It must of course ensure a proper balance between providing effective incentives and a stable framework for private investors whilst minimising the cost to bill payers. However, we are most concerned that the review of the range of financial incentives provided through “banding” will not be completed until the summer of 2011 and to discover, after the hearing, that any changes to banding would not be implemented until April 2013. We note the Department is seeking to accelerate this timetable and introduce earlier staged reviews.

The Department is counting on a massive growth in wind power during the next decade to meet the 2020 target. While the technology may now largely be in place to meet the 2020 target, there is considerable lost ground to make up and difficult obstacles to overcome. For example, the 6000 2.5 megawatt or 10,000 1.5 megawatt onshore wind turbines the Department estimates will be needed to meet the 2020 target will have to overcome financing constraints and obtain planning approval, which typically results in around 40% of proposed projects being abandoned.

Achieving the 2050 target for an 80% reduction in greenhouse gas emissions will need further innovation in renewable energy technologies to increase supplies after 2020. We observed that the department has developed pathways to achieving the 2050 target, but has not set out the innovation milestones that it will need to meet if it is to achieve its longer-term goals.