One of the UK’s leading developers of small scale wind turbines, Gaia-Wind, has today confirmed it has called in liquidators, sparking concerns other small scale renewables operators are facing an increasingly uncertain future in the face of on-going policy uncertainty.
The Glasgow-based firm has sold around 2,000 of its turbines globally and enjoyed considerable success as an exporter to markets as far afield as Denmark, Italy, Japan, Alaska, and Tonga. However, recent cuts to subsidy regimes in a number of key markets and continued uncertainty about the future of the UK policy landscape have combined to leave the business with “no option but to cease trading”, sources said.
Michael Reid, Meston Reid & Co has been appointed as provisional liquidator and hopes remain a buyer can be found for all or part of the business. In the meantime, 12 jobs remain at risk.
The development has prompted considerable frustration across the renewables sector with a number of industry sources accusing the government of dragging its feet with plans to reform support for small scale renewables.
Under the government’s current plans the feed-in tariff (FiT) incentive scheme, which pays households and businesses a premium for power generated using eligible small to mid-sized renewable technologies, is due to end in April 2019. The government maintains falling renewables costs and the emergence of cost-competitive energy storage technologies means the sector can increasingly stand on its own two feet. But many within the industry maintain some form of policy support is required beyond April 2019 to ensure technologies covered by the FiT scheme can ease towards a scenario where they operate without subsidy support.
A consultation on what will follow the FiT scheme has been expected for months, but while informal conversations between government and industry have taken place no policy proposals have been forthcoming. With just over a year to go until the current subsidy scheme lapses, companies are increasingly concerned about their medium term prospects.
In a tellingly pointed statement issued in response to the news of Gaia-Wind’s liquidation, RenewableUK’s executive director Emma Pinchbeck warned “inaction by government has real consequences for small businesses and the communities they work with”.
“We have warned officials time and again that a failure to treat this issue as urgent puts jobs at risk,” she added. “These are local jobs created by British entrepreneurs. We need clarity on the future of small-scale renewables as soon as possible for the sake of other flagship firms and innovative community energy projects nationwide.”
Speaking on condition of anonymity, other industry sources were even more forthright in their criticism of government. “The story of the feed-in tariff is a long history of blundering,” said one insider. “Having set up a system to encourage start-ups in this sector there has been a complete failure to understand how you develop a market. A system of subsidy is designed to tail off over time, but it has been a series of juddering slashes in support and that has affected the confidence of people in the market.”
However, it is the failure of the government to come forward with proposals on how to manage the transition away from feed-in tariffs that is now fuelling fears Gaia-Wind could be followed by other businesses that call it a day in the face of continued uncertainty.
“Something is meant to replace FiT in 2019,” said a separate industry source. “Government promised a consultation on what it would be – but that was over a year ago and there has been no sign of these promised proposals. There needs to be some visibility for the future. There are at least half a dozen more companies who are at risk.” Other sources agreed several more firms were at risk of liquidation unless clarity over their future route to market is provided.
A number of different policy proposals are thought to be under consideration that could ease the impact of the FiT’s closure. Insiders say tax breaks, targeted support through a sector deal under the auspices of the government’s Industrial Strategy, and planning reforms could all help.
Meanwhile, hopes remain that some of the technologies currently supported through the FiT could be allowed to compete for price support contracts through contract for difference (CfD) auctions. Insiders are confident the cost of some FiT eligible renewables technologies are now low enough that bids for contracts could undercut wholesale prices resulting in “subsidy-free CfDs”. “It wouldn’t cost billpayers or the government anything,” said one expert. “But without some form of contract guaranteeing prices you can’t find investors to touch projects.”
However, while conversations are continuing the government is yet to show its hand. “There are lots of ideas being exchanged, but no clear vision from government yet,” said one source.
The Department for Business, Energy, and Industrial Strategy (BEIS) was considering a request for comment at the time of going to press. However, Ministers are thought to be wary of any form of support that could add to levies on energy bills and are increasingly confident a combination of plummeting technology costs and the emergence of energy storage technologies should allow solar, small scale wind, and other technologies to prosper without much in the way of additional policy measures. It is a school of thought that has been strengthened by the handful of developers now looking to bring forward subsidy-free projects.
But while a fully subsidy-free environment remains the over-arching goal across the sector, industry insiders fear that without some form of replacement for the FiT a market for small to mid-sized renewables that can bring with it multiple environmental and energy security benefits could face a period of painful contraction and yet another boom and bust cycle.
“Without a shadow of a doubt these technologies have a role to play,” said one source. “But government has succumbed to incredible lobbying and antipathy to distributed energy and wind technology in particular, despite the huge potential it has to lighten the load and provide power to the outstretched tips of the grid in the countryside.”
Others fear that without urgent action from government the fledgling renewable heat sector could face a similar challenge within the next 18 months. “The Renewable Heat Incentive is due to end in 2021 and there is still no clarity on what happens next,” noted one source.
Meanwhile, Gaia-Wind is hoping a future for the company can yet be secured. “Appointing a liquidator is the last resort because the board has worked hard over a long period of time to develop a sustainable business in wind energy,” said Director Johnnie Andringa. “With almost 2,000 wind turbines installed mainly in UK and Europe as well as Australia, Tonga and Alaska, an opportunity presents itself for someone to purchase the service, maintenance and spare parts aspect of the business. With the turbine design offering the best price, performance and reliability available in the market, and demand still evident for the product in the UK and globally. It would be great if a trade sale could be achieved which preserves the jobs of the highly skilled and committed workforce.”
The argument for small scale wind and other forms of mid-sized renewables remains compelling, especially as costs continue to fall and energy storage technologies mature. The case for providing clean power to remote and off-grid locations is still strong and a long term market remains for companies operating in this space. But without urgent clarity about the future of the policy environment beyond April 2019 fears will continue to grow that others could succumb to the same challenges faced by Gaia-Wind.