Two of the UK's big six energy companies are calling on the government to extend the current mechanism which supports Renewable energy until 2020 or risk losing billions of pounds worth of investment.
RWE-Npower and Scottish and Southern Energy (SSE), two of the UK's largest renewable investors, say that the current cut-off period of 2017 risks leaving an 'investment hiatus' potentially halting investment, especially in offshore wind.
The government's proposed Electricity Market Reform (EMR) includes transitional arrangements to move from the current system, called the Renewables Obligation (RO) to a new support structure under Feed-in-Tariff Contracts for Difference (CfD)
But the reforms were sharply criticised by the parliamentary select committee one energy and climate change and the timetable for their introduction is slipping. The plans are not now expected to come before parliament until November at the earliest.
The delay to the EMR timetable makes the proposed lag between the first CfD contracts and close of the RO in 2017 insufficient," said Volker Beckers , chief executive of RWE N-Power.
"Extending the RO until 2020 would provide developers with a backstop option that enables continued investment and growth, whilst industry becomes comfortable with the benefits of the CfD."
SSE said the current high levels of uncertainty were spreading beyond the utilities towards the rest of the UK's green economy.
"While uncertainty over the future support system remains, we cannot push the button on new renewable investments. Neither can the supply chain build turbine factories, projects like offshore wind farms can take many years to develop and the current support (RO) ends in just 2017." said SSE's Policy and Research director, Keith Maclean.
New so-called round 3, deep water, offshore wind farms can take around five years to develop - which means companies are now facing millions of pounds in development costs without knowing whether there will be a market for their projects.
The two firms called for a period of 'parallel running' between the old and new system to allow them to continue investing. SSE said the firm is currently investing around £1.5bn a year in offshore wind.
RWE warned that otherwise the government risks a similar hiatus to that experienced when the subsidy mechanism was last changed.
"The transition from former renewables support mechanism, the Non Fossil Fuel Obligation, to the RO created an investment hiatus, with the build rate for UK wind falling to just half of that experienced in 2000," said Mr Becker.
"The risk of project delays makes the UK market less attractive for the supply chain, resulting in less inward investment and fewer jobs," he added.
Earlier this year the Danish firm Vestas abandoned plans for a new offshore wind factory in the UK whilst German engineering giant Siemens is delaying its plans for a new plant until the uncertainty is resolved.
The latest warnings from the utilities follow two letters signed by a string of businesses including Siemens, Alstom and Marks and Spencer’s calling for the government to firm up its targets on clean energy in order to reassure investors.
Investment in offshore wind is likely to be hit first because decisions on projects not due until after 2017 are being made now.
"Offshore wind is likely to be most affected by uncertainty due to the significant development timescales and cost. At best, uncertainty will drive up the cost of investment in the industry, at worst it will stall projects and deter further deployment," said Andrew Perkins a partner at Ernst and Young's environmental finance division.
However, some have suggested the government could still avoid needing to extend the current mechanism if EMR is passed sufficiently quickly.
"The current timetable for EMR allows just enough time for this overlap, but there is no additional leeway for delay," said Dr. Gordon Edge, Director of Policy at Renewables UK.
