We are often asked to see if we can find solutions for potential government-imposed caps on generation output, changes in subsidy payments and alterations to tariffs in one form or another, but it is an area where, generally speaking, the kind of guarantee sought is not given by insurers. Developers are looking for a longer period of certainty to give their investors and backers a greater degree of certainty.
Recent examples of government putting on the brakes include:
- The Spanish government restricted the production hours for solar projects, leaving many projects with an insufficient energy yield to meet their fixed costs.
- The High Court in the UK is hearing a legal challenge on reduction in feed-in tariffs for solar, on the grounds that the rushed plans to slash solar subsidies have pulled the plug on many projects.
- As reported in the Sunday Times, the “Archimedes” screws that are going into the Thames to help power Windsor Castle are just one of many projects in the hydro industries pipeline, but the company behind these turbines has suspended all new projects claiming there is insufficient certainty around the backing of renewable schemes.
The renewables industry is working very hard to bring down costs and create jobs and, over time, it’s more than capable of standing alone, but at this point it cannot change direction quickly, so the immediate reaction to a short-term change in policy is to go into a holding pattern. The renewables industry will thrive on some solid long-term targets, but until policies are firmly committed the emerging uncertainly seems to sit with national energy policies.
|This post was part of the special feature about What Risks Will Emerge in 2012? published January 24, 2012. The feature also covered emerging risks in these other fields:|
Power & Utilities
Supply Chain Interruption