Andy Burnham to halt wind and solar subsidies in net zero climbdown

Andy Burnham has ordered a halt to new wind and solar power subsidies in a net zero climbdown aimed at cutting household energy bills. The Government revealed on Tuesday that next year’s auction of contracts for difference (CfDs) – a form of state support for renewable energy projects – will be paused to ensure it benefits consumers. This year’s auction, known as auction round eight, is expected to continue as normal in the coming weeks.

It is expected to award subsidies that could be worth hundreds of millions of pounds a year, paid for by households and businesses. But Michael Shanks, the energy minister, told the House of Lords environment committee that next year’s auction was being put on hold so that the CfD programme could be reformed. It follows concerns that the development of renewable power capacity is moving faster than work to upgrade the electricity grid .

This has resulted in network bottlenecks and vast amounts of power going to waste. It has also led to wind farms being paid hundreds of millions of pounds to switch off, a practice known as “curtailment”. Mr Shanks told peers that the Government was drawing up a new plan to prevent too much future capacity being built in Scotland, which is behind the biggest bottlenecks. He said the way subsidies are awarded will also change. CfDs are the UK’s flagship mechanism for supporting renewable energy projects and are ultimately funded through consumer bills.

They ensure generators are always paid a fixed strike price for the electricity they produce, regardless of market prices. Developers win CfDs by putting forward projects and bidding for fixed prices in auctions, helping to ensure the strike prices are competitive. Last year’s estimated CfD budget was £1.7bn, covering wind farms, solar farms and other clean technologies. “The CfD process has been incredibly useful to give investors certainty to build new projects,” Mr Shanks said.

But he added that “we do now want to pause” before the next auction round to “look at whether we need some more significant changes to the contracts for difference scheme to make sure they work for the consumers of the country”. John Healey, the Chancellor, declared in last week’s Budget that Labour’s priority was “first and foremost cheaper energy”. Whitehall sources told The Telegraph that his remarks signalled a demotion of the 2030 clean power targets championed by Ed Miliband, the Foreign Secretary, when he ran the Department for Energy Security and Net Zero.

Dan Tomlinson, a Treasury minister, said after the Budget that Mr Burnham would pursue “a new energy pathway” to “bring energy costs down to help British business to compete and British households to cope”. Pointing to the rising cost of wasted wind power, Mr Tomlinson said: “With growing constraint and distribution costs, it’s right that the system costs of all new power are considered.” He added that the UK would “only procure clean power” through auction round eight “if we are confident it will lower bills” and “we will reform the contract for difference [for the next auction] to support building the lowest cost system, fixing market distortions and siting assets in the right place”.

Ministers have also imposed a moratorium on new levies and policy costs being added to bills. The Government insists that it stands by the 2030 clean power targets, which aim to ensure that 95pc of electricity generated by the end of the decade comes from “clean” sources such as renewables, nuclear or batteries. However, ministers have sought to downplay the commitment. Miatta Fahnbulleh, the Energy Secretary, told MPs last month that it would be “pretty hard” to deliver clean power while keeping bills down , having previously said that affordability was her top concern.

She also told a conference that while her department would “play its part” to try and reach Mr Miliband’s target, “the public doesn’t measure the success of our energy system in gigawatts – they measure it in bills”. James Alexander, chief executive of the UK Sustainable Investment and Finance Association, which represents pension funds and other big financial backers, said: “Investors will be deeply concerned by comments from the energy minister today that cast doubt on next year’s renewable energy auction.”

He added: “The Contracts for Difference model has been a crucial driver of investment in clean power, helping to secure record offshore wind capacity this year and build a world-leading renewables sector. “But telling markets the Government intends to review this process risks sending a worrying signal about the strength of the UK’s commitment to the energy transition. “We now need to see urgent clarity on the future of this process, or the Government could put billions of pounds of capital at risk.”

The Government has been approached for comment.