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Government to change how it subsidises renewable energy

The government is to make big changes to the way it subsidises renewable energy, the BBC has reported.

Ministers say they will cut support for onshore wind and solar energy, but give more backing to offshore wind power.

Chief Secretary to the Treasury Danny Alexander described the shift in subsidy as “a rebalancing” and said overall spending would not change.

But Labour said “chopping and changing” pricing was bad for business.

The price producers are promised for onshore wind power and solar energy will be cut from 2015, while the amount paid for offshore wind power will be increased.

The shift on wind energy comes ahead of Chancellor George Osborne’s Autumn Statement, which he will deliver to MPs on Thursday.

Sources from both coalition parties said there had been so much investment in onshore wind and solar energy that they no longer needed so much state support.

In contrast, they said, offshore wind sources still needed more subsidy to encourage long-term investment.

Mr Alexander denied suggestions the move was a response to Conservative MPs’ unhappiness at wind farms being sited in their constituencies.

Both Conservative and Liberal Democrat sources said the decision made good political sense because they would have a policy that countered the threat from the UK Independence Party, which opposes all wind farms on principle.

Strike prices - the amount the government guarantees to pay per unit of electricity - are set substantially above the current value of energy, as a form of long-term subsidy to encourage firms to invest.

The subsidy cut makes onshore wind cheaper than nuclear power this decade - and much cheaper in the long term.

But after hinting at big cuts in onshore turbines, ministers have made only a slight reduction - and this may not lead to many projects being cancelled.

The money that ministers shave off the onshore subsidy is transferred to offshore wind.

But offshore generation is much more expensive, so every pound shifted this way generates less electricity. And that in turn slightly increases the chances of blackouts in 2015.

The decisions on renewables are driven by conflicting priorities.

The government wants to disarm a campaign against onshore wind farms; encourage a world-leading offshore wind industry; gain as much energy as possible for the cheapest price; and meet UK and EU targets on clean power.

Energy Minister Michael Fallon said costs must be spread “much more fairly”.

Downing Street denied that cuts in subsidies for onshore wind farms were in response to public concern that they were blighting the countryside.

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