The UK government is considering opening its renewable energy subsidy scheme to power producers in Ireland and other countries.

Overseas projects supplying the UK grid may be able to compete for subsidies as early as 2018, according to a government consultation paper. Projects awarded subsidies in 2018 would come online a few years later.

Under the new "contracts for difference" scheme, worth more than £200 million each year, the UK will top up wholesale prices to ensure fixed prices for green energy producers. These will be partly determined through auctions, starting in October.

Competing for subsidies

The UK hopes that by eventually opening this scheme to overseas producers, it could cut costs by increasing competition for subsidies.

Irish projects are likely to be well placed to compete. Wind farms off the east coast of Ireland are potentially already cost competitive with many UK offshore wind farms, said Gordon Edge of UK green energy association Renewables UK.

He said falling technology costs would improve the competitiveness of Irish onshore wind in the 2020s, even with high transmission costs factored in, to the point where it might even be able to undercut UK nuclear power.

EU target

The paper makes it clear the UK has ruled out the possibility of buying renewable energy from Ireland to help meet its EU renewable energy target for 2020. It is not on track to meet a goal of 15 per cent renewables in its energy mix, putting it at risk of fines from the European Court of Justice, and had considered Irish imports as a contingency plan.

But the long lead time for building transmission infrastructure makes this un viable. And many UK renewable electricity projects are to come online before 2020, constraining the resources available for extra subsidies. The UK has set annual limits on low-carbon energy subsidies rising to £7.6 billion in 2020.