 |
||
This article recently appeared in the Birmingham Post, please click here for further details. The budget prompted press coverage devoted to the parlous state of the nation’s finances, the need for spending cuts and the tax burden – however, important ‘green’ measures in the budget went largely unnoticed. We need to keep some perspective here; total government debt will rise to around 80% of GDP by 2014, not falling back until 2018. If climate change predictions are anywhere near accurate, by then, the state of our economy could be the least of our worries. The government’s much hyped 80% legally binding emissions reduction target, enshrined in last year’s Climate Change Act will help, but 2050 is a long way off. More relevant is the budget announcement of a 2020 emissions reduction target of 34%, increasing to 42% if we see a global deal to replace the Kyoto Protocol. Meeting these targets requires serious and rapid changes to our infrastructure, industry and behaviour, including decarbonisation of our power industry. The budget announcement of increased subsidy to the offshore wind industry was therefore welcome. According to the British Wind Energy Association, there are around 5GW of onshore and offshore wind schemes, worth an estimated £10 billion, “shovel ready” for completion within the next 3 years. Yet wind projects have suffered the double whammy of a decline in value of sterling against the dollar and the collapse in availability of project finance. Projects have stalled; especially the critical large offshore schemes and developers have been appealing to government for help. The budget response included a potential £525m of cash through changes to the subsidy mechanism for offshore wind and a new deal with the European Investment Bank to provide a package of up to £4bn for investment in renewable infrastructure projects. This support package was a rabbit out of the Chancellor’s hat, though tweaking the subsidy mechanism and encouraging EIB funding means the government will not be dipping into its own coffers. Industry reaction was positive and immediate, illustrated by Danish energy group Dong announcing it would now press ahead with its wind farm in the Irish Sea. Dong and its partners, including Coventry based Eon, have also re-committed to the London Array project - which will be Europe’s largest offshore windfarm, opening up the enticing possibility of the world’s first renewable Olympics in 2012. And only last month saw Europe's largest onshore wind farm coming on stream, as the £300m East Renfrewshire development by ScottishPower Renewables began using 140 massive turbines to produce electricity for up to 180,000 homes. Whilst the politicians and commentators will continue to argue about public sector debt, spending cuts, higher rate tax and MPs expenses - and rightly so, what matters now is that much needed new infrastructure works seem back on track. For further information please contact: Andrew Whitehead, Partner
|
||