Wind farm subsidies cut by only 10%

The Energy Department has resisted calls for significant cuts to onshore wind subsidies, announcing a reduction of 10% in payments for new farms.

But environmental groups reacted angrily to Government support for future gas power, which was also outlined on Wednesday in what appears to be a compromise between the Lib Dem-led department and Chancellor George Osborne.

Mr Osborne had offered to drop his demands for deeper cuts in subsidies for onshore wind farms if the Lib Dems compromised on retaining a big role for natural gas rather than commit to the virtual decarbonisation of the power sector by 2030.

Reports had suggested the Chancellor, backed by pressure from 100 Tory backbenchers to reduce support for onshore wind power, was demanding cuts to subsidies for the technology of 25%. But the Department of Energy and Climate Change (Decc) confirmed that subsidies, which are paid for from consumer energy bills, would be reduced by 10% as planned from 2013.

Energy Secretary Ed Davey said the changes to subsidies for renewables, which also include reducing offshore wind payments and more than doubling support for tidal stream and wave power, would boost clean electricity while curbing the cost to consumers. The moves could prompt investment of between £20 billion and £25 billion in the economy between 2013 and 2017, Decc claimed.

But Wednesday's announcement also set out the Government's backing for gas, including £500 million tax breaks for shallow water gas fields to boost investment in economically-marginal gas fields.

The backing for gas comes just weeks after the Government's advisers on climate change said it should rule out a new "dash for gas", warning it would push up energy prices and make it hard to meet targets to cut emissions. But Mr Osborne said gas was the biggest single source of energy in the UK.

"Today the Government is signalling its long-term commitment to the role it can play in delivering a stable, secure and lower-carbon energy mix," he said. "At the Budget, we announced an ambitious package of support to stimulate billions of investment in oil and gas production in the North Sea. Today's news is a further sign of the Government's determination to get the most out of a huge national asset."

The support for gas was criticised by renewable energy firm Ecotricity founder Dale Vince, who said the Chancellor was presenting the £5 per household support for onshore wind as a cost to consumers, while ignoring the rising cost of gas in the free market which added £120 to everybody's bill last year.

"It is surely abundantly clear which of these fuel sources is actually a burden to the British public - not to mention contributing to climate change," he said.