Rick Eggleston, managing director of REpower UK, warns hold-ups are making long-term investment decisions impossible
The ongoing delay in the announcement of the new ROC (Renewable Obligation Certificate) banding system is problematic for the industry, affecting investor confidence and making long term planning impossible.
The new ROC banding levels were due to be announced in September 2011, but we are yet to hear anything. These unannounced levels come into effect in less than a year and a half. When you consider the 5-10 year duration of a typical project from planning through to commissioning, making sensible, long-term investment decisions is virtually impossible.
Beyond 2013, the sector will go through the whole process again in advance of March 2017 when the ROC system is due to be scrapped and replaced with a Feed-in Tariff (FiT), which carries its own uncertainties.
Operating a business, or in this case an entire industry, in a stop/start fashion is incredibly expensive, as well as being damaging to investor confidence. We are already seeing capital being expended in an attempt to accelerate projects to complete ahead of the March 2013 deadline. With so many projects pulled forward, this is likely to create a drop in activity post 2013, followed two years later by a further peak to build in advance of 2017.
We will also see projects being pushed through the expensive and time consuming planning process, in some cases only to become unviable when the new revenue mechanisms are announced.
In addition to decisions on individual projects, there is also the bigger question of setting up local supply chains, which create UK manufacturing jobs. The UK needs to compete for these jobs with its international neighbours, and this needs a stable UK market.
The industry is already planning projects, supply chain and support infrastructure today which will be in operation beyond 2030, yet we have no clear basis upon which to make an investment decision.
If the government is committed to creating a low carbon economy, then it needs to take a lead by stating a clear policy, and giving industry time to adapt to any changes. The industry can then do the rest.
Rick Eggleston is managing director of REpower UK