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When is a turbine subsidy not a subsidy?

Andrew Neil | 14:10 UK time, Sunday, 6 March 2011

I should have got round to this quicker but it's been a busy week! On Wednesday's Daily Politics Transport Secretary Philip Hammond said that "onshore wind [turbines] doesn't need subsidy anymore, onshore wind can pay its way."

I expressed scepticism when he said it, but didn't have time to probe his claim. Anyway, since then I've looked into it and here is my understanding.

Onshore wind turbine generators don't necessarily get a direct subsidy to build or operate the turbines (though some might) but under the government's
Renewables Obligation electricity companies must buy power generated by onshore turbines at twice the market rate. 

This 100% higher price is then passed on to the rest of us in higher electricity bills. (The price for offshore generated power enjoys, I'm told, an even higher officially-mandated mark up).

So it's not so much a subsidy in which government doles out billions of our money to keep the turbines going. It's an artificially high price they are empowered by law to charge to keep them going, which is then passed on the rest of us. Otherwise, as I understand it, the turbines
would be uneconomic. You may conclude that is as much a subsidy as a straight taxpayers' grant.

That, I emphasise, is my understanding. It's a complicated business and Mr Hammond (or
Mr Huhne at Energy) may be able to correct me. I know Whitehall departments read this blog so I look forward to the replies of either the Hammond or Huhne departments, whose responses we will of course publish. (see update below)

Readers will no doubt have plenty comments of their own to make.

Watch Johnny Ball's film about climate change scares that prompted the debate


We have now heard from the Department for Energy, who want to point blog readers to this link.

A spokesman said: "The current high oil price, and the increasingly clear evidence on climate change, underline the need to move away from fossil fuels. 

"Onshore wind is one of the cheapest forms of low carbon energy and the UK has a massive natural resource to exploit. 

"There is no direct public subsidy, but wind energy does benefit from the Renewables Obligation."

See the newest blog entry for Andrew's comments on this.



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