On the 4th of February, REF wrote to the Secretary of State for Energy & Climate Change, The Rt Hon Ed Davey, MP, defending our calculation of the future costs of the offshore wind program, which DECC had called "pure speculation". We also criticised the Department's assumption that costs would come down in the future, and suggested that if anyone was speculating it was DECC. We received a response yesterday, with additional underlining in Mr Davey's own hand.
In his response, the Secretary of State shows that he trusts the wind industry when they promise to cut costs in the future. That seems to us an extremely hazardous position to take. Bluntly, a subsidy-seeking industrial sector might say anything to get their foot in the door, and their undertakings should be treated with caution, particularly when the consumer burdens entailed are so vast.
However, we are pleased to note that Mr Davey seems to understand that costs must come down if the industry is to have a long term future. In our original letter we wrote:
"Perhaps most crucially, if DECC intends subsidies to offshore wind to be cut in the future, then this fact should be made crystal clear, so that investors can plan accordingly, and the public can evaluate government’s attempts to protect the consumer interest."
The last paragraph of Mr Davey's letter appears to be an answer to this:
"The Government's decisions to reduce some RO subsidy levels, for example, send a strong signal to industry that we expect this to happen over time [...] we believe cost reduction is very much a 'must have' if the technology is to reach its full potential"
While Mr Davey is some way from promising further cuts over and above those already planned, this paragraph does suggest that government is aware of the risk of consumer rebellion when faced with very high subsidy costs. We would prefer it if Mr Davey were to make it clearer still that government will not write a blank cheque on the consumers' account, but insofar as it goes his remarks are encouraging.
A copy of Mr Davey's letter is attached.
 DECC Letter to REF on Off-shore Wind Costs |