Published on May 25th, 2012 | by Zachary Shahan1
UK Government Delays Solar FiT Cuts & Puts Scheme on More Predictable Path!
After months and months of controversy, it seems the UK government has finally come up with a solution to its Feed-in Tariff (FiT) saga that makes people in the solar industry and wanting to go solar a bit happier than they have been. It has delayed the next round of cuts to August 1, and the plan after that is much more predictable than it has been. However, all still isn’t peaches and cream.
“We remain very concerned that the market has stalled, and the recession certainly hasn’t helped,” said Paul Barwell of the Solar Trade Association. “However, today’s announcement means we can now be confident that even when tariffs are adjusted on August 1, solar will still offer attractive returns to consumers – certainly when compared to other investments currently available.”
“We are pleased that ministers have listened to the deluge of complaints from the solar industry about the scale and speed of the cuts proposed in their consultation document earlier this year,” said David Hunt, a director at Eco Environments. “But we are also disappointed that the Government still seems hell-bent on making life very difficult for the solar industry… While the return on investment remains attractive at around six per cent, by reducing the FIT lifetime by five years consumers will earn approximately £20,000 less than they would have done if the 25 year term had been left in place.”
Here’s the full announcement on the solar FiT changes from the DECC:
CERTAINTY FOR SOLAR
DECC is introducing regulations today to put the Feed-in Tariffs (FITs) scheme on a more predictable, certain and sustainable footing for householders, businesses and the solar industry.
Following detailed consultation with industry and consumers, the Government is introducing a range of changes to the FITs scheme with effect from 1 August to provide better value for money and allow businesses and householders to plan with confidence. This is good news for the industry and for consumers and will ensure that as many people as possible benefit.
The tariff for a small domestic solar installation will be 16p per kilowatt hour, down from 21p, and will be set to decrease on a 3 month basis thereafter, with pauses if the market slows down. All tariffs will continue to be index-linked in line with the Retail Price Index (RPI) and the export tariff will be increased from 3.2p to 4.5p.
The new tariffs should give a return on investment (ROIs) of over 6% for most typical, well-sited installations, and up to 8% for the larger bands.
The industry has been very successful in bringing solar technology costs down swiftly over the last two years and the improved scheme will reflect this trend as well as recognise the increasingly significant place solar PV can now have in local renewable electricity generation.
Energy and Climate Change Minister Greg Barker said: “Today starts a new and exciting chapter for the solar industry. The sector has been through a difficult time, adjusting to the reality of sharply falling costs, but the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector.
“We can now look with confidence to a future for solar which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain’s clean energy economy.
“I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.”
Alan Aldridge, Chairman of the Solar Trade Association said: “We broadly welcome many of the Government’s decisions for how solar PV will be treated in the FITs scheme and wholeheartedly welcome the inclusion of Solar in DECC’s updated Renewables Roadmap; this should reassure consumers and solar companies alike that the Government recognises and stands behind a major role for the solar industry.
“Despite the currently slow market, the industry can have some confidence that the new Tariffs are tight but workable. Householders should be reassured the new Tariffs will provide more attractive returns than can be found elsewhere today. The STA is now keen to work with Government to get this positive message out.”
CHANGES TO SOLAR FEED-IN TARIFFS
Tariffs for solar pv installations to be reduced from 1 August:
- 16p/kWh for household scale solar pv installations to reflect fall in cost of the technology, delivering a return of about 6% for a typical installation.
- Tariffs for larger installations also to be reduced to reflect cost reductions but with most tariff cuts lower than proposed in February.
- Reductions to apply to new installations from 1 August, instead of 1 July as proposed, in recognition of low uptake from 1 April and providing time for industry to adapt.
Multi installation tariff increased to 90% of standard tariff
- Organisations with more than 25 solar pv installations will get 90% of the standard applicable tariff, increased from 80%, reflecting new evidence on costs involved for these projects.
Reduction in tariffs over time in line with uptake of FITs scheme
- Ensuring solar PV is not over subsidised.
- Average tariff reductions of 3.5% every 3 months, reductions will be bigger (up to 28%) if there is rapid uptake.
- Tariff cuts will be skipped (for up to 2 quarters) if uptake is low.
- Uptake in 3 different bands (domestic (size 0-10kW), small commercial (10-50kW) and large commercial (above 50kW and standalone installations) will determine the quarterly reductions within those bands.
Increase export tariff from 3.2p to 4.5p/kWh
- To better reflect the real value of electricity exported to the grid.
RPI index-linking of generation tariffs to be retained
- Reflecting the high value investors place on this element of the FITs scheme.
Scheme lifetime reduced from 25 to 20 years for new solar installations
- Reducing the lifetime costs of the scheme and bring solar in line with most other technologies supported under FITs.
Tariffs for installations which do not meet the energy efficiency requirements will mirror the tariffs for standalone installations
- Ensuring energy efficiency is still encouraged as tariffs are reduced.
STRATEGY FOR SOLAR
Government sees a bright future for solar here in the UK and expects to reflect the growing role of solar power in the UK’s energy mix in its updated Renewable Energy Roadmap later this year. Uptake by 2020 will however depend on when solar PV becomes viable with little or no subsidy and 22GW by 2020 is an achievable ambition if industry can get its cost down quickly. That is why Government has also launched a solar PV cost reduction taskforce in partnership with industry to help drive down costs down faster while maintaining safety and standards.
DECC is also pleased to welcome plans being brought forward by Cornwall Council and the Building Research Establishment to set up a National Solar Centre in Cornwall.
Energy and Climate Change Minister Greg Barker said: “I am very happy to see a proposal for the creation of a National Solar Centre in Cornwall, led by the Building Research Establishment.”
Cllr Alec Robertson, Leader of Cornwall Council said: “The FITs scheme allowed many people across Cornwall to learn about renewable energy, especially solar power, and Cornwall would welcome the establishment of a new National Solar Centre that will be at the heart of the bright future for PV in the UK. We’re pleased that DECC has announced changes that improve the predictability for the FITs scheme”
FITS CONSULTATION 2B
Decisions following the consultation on the other technologies under FITs will be announced in the summer.
Image: Solar panels on England row houses via Shutterstock