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U.K. Embraces Fracking, Picks Winners And Losers Among Renewable Energy Industries

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"U.K. Embraces Fracking, Picks Winners And Losers Among Renewable Energy Industries"

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The U.K. government on Thursday announced generous tax breaks to the hydraulic fracturing industry, just one day after touting a green energy investment strategy that it says will bring $65 billion in renewable energy investment to the country.

According to U.K. Treasury Chancellor George Osborne’s announcement, companies that explore shale gas will now be relieved of up to 75 percent of taxes for their early profits. The Chancellor said the tax breaks would make it easier for fracking companies to operate, therefore bringing “thousands of jobs, billions of pounds of business investment, and lower energy bills.”

Interestingly enough, the announcement came just one day after the country’s Department of Energy and Climate Change (DECC), announced reforms to its electricity market that it said would attract $65 billion in renewable investment over the next seven years. Those changes are updated “strike prices” — akin to subsidies in the United States — that indicate just how much monetary support different types of renewable energy projects get from the government in exchange for investment in a low-carbon grid. The new strike prices will increase government support for offshore wind, geothermal, and hydro power.

The pairing of the two energy reforms is strange given the government’s carbon budget, which mandates Britain to cut greenhouse gases 34 percent by 2020 and by 80 percent by 2050 from 1990 levels. While $65 billion in increased investment in low-carbon, renewable energy by 2020 would be a huge step toward meeting those goals, the government could be partially offsetting them by implementing an enormous incentive for a controversial methane-emitting fossil fuel industry.

In addition, buried in the DECC’s renewable reforms were the fact that the government would actually cut monetary support for solar parks and onshore wind farms.

Under the renewable rules, the DECC will implement sweeping cuts to subsidies for the onshore wind industry, which some renewable groups say could damage plans for small, on-farm turbines and large-scale onshore wind farms. Paul McCullagh, the chief executive of small wind developer UrbanWind, told Business Green that the government’s decision to cut onshore wind was particularly “ham-fisted,” as it “naively lumped all types of onshore wind together and made the draconian move of cutting subsidies across the board.”

The solar industry also received news that its subsidies would be cut, but in another weird turn of events, the Solar Trade Association told The Telegraph on Wednesday that it had actually asked for less money. According to the paper, the industry group didn’t even want the subsidies they were awarded under the new rules. The STA “can’t understand why” the government would reject its request to receive support in 2016, a year it expects to be doing particularly well.

It’s not hard to be skeptical of clean energy objectives set forth by the current U.K. government, which has had a questionable history meeting the challenges of climate change. Since Premier David Cameron has promised “the greenest government ever,” he has been plagued with skeptics who assert differently. Cameron, for example, last year appointed known climate denier Owen Paterson as his Environment Secretary. Chancellor George Osborne, who announced Thursday’s fracking tax breaks, has for more than a year has said the U.K. shouldn’t lead the world in reducing pollution from fossil fuels. Just recently, the Sun reported that Premier David Cameron ordered his aides to “get rid of all the green crap” from energy bills in an attempt to bring down costs. The PM has denied the claim.

The DECC’s proposed reforms would, however, provide large government benefits to companies who invest in offshore wind, hydro, and geothermal power. Under the new rules, the DECC will boost subsidies for the offshore wind industry in order to ensure an extra 2GW of wind capacity by 2020. The geothermal industry will also have its support levels increased by £20 per megawatt hour each year, while the hydroelectric industry received a boost of a £5 per megawatt hour.

“This package will deliver record levels of investment in green energy by 2020,” Energy and Climate Change Secretary Edward Davey said in a statement. “Our reforms are succeeding in attracting investors from around the world so Britain can replace our aging power station and keep the lights on.”

In addition, Greenpeace policy director Doug Parr told Solar Power Portal that cuts to subsidies for onshore wind and solar are actually good news, because it means the industry is becoming more self-sustainable. “Today’s cuts to onshore wind and solar support schemes show how quickly the cost of clean energy technologies are falling,” he said. “Onshore wind farms will power our homes and factories more cheaply than new nuclear stations, and the same is expected of solar.”

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