The end of the British government’s consultancy period on the introduction of a feed-in tariff (FIT) system, to be called the Clean Energy Cash Back System when introduced in April 2010 finished last week, sparking debate on the viability of the proposed system.

The Renewable Energy Association (REA) has raised doubts as to the potential effectiveness of the Cash Back System. The proposed system, essentially a feed-in tariff, works by offering fixed, premium rates for renewable energy fed-in to the grid by small scale (sub 5mW) energy producers, and bought by the utility companies who are obliged by the legislation to purchase the units of energy over a set number of years.

With the key purpose of the tariffs to attract investment in young renewable industries through incentivisation, the REA has expressed doubts about whether the rate offered by the government for clean energy will prove sufficient to spark sufficient investment.

Indeed, while supporters of the scheme have stated that 5% of the UK’s energy could be generated by renewable means by 2020, the UK government has set the meager target of 2% by 2020 triggering worries that the rate will not be high enough to demonstrate attractive returns for those wishing to invest in the new industries.

Speaking on behalf of the REA Leonie Greene stated,

“From the industry’s perspective the scheme is well designed, but the proposed tariff levels are set too low and applied inconsistently across technologies.”

Where feed-in tariffs have been introduced elsewhere, they have proved to be extremely effective mechanisms for generating huge interest in green energy. However, successes have been based upon generous, yet well balanced schemes and this will be a key factor in either the success or failure of the UK renewable industry.

Dave Timms, campaigner for Friends of the Earth expressed his own concerns,

“The Clean Energy Cash Back scheme has huge potential, but it will fail to make an impact unless the government dramatically improves the amount that will be paid to businesses, households and communities that generate renewable electricity.”

Solarfeedintariff.co.uk, has followed up the providing of the high yield Solar Investment Bond by releasing an investment product based on the construction of a 50MW solar thermal plant in Spain.

With the solar thermal industry predicted to be worth around €16.4 billion annually within the next 20 years, investors across Europe are turning their attention to new energy technologies, with solar thermal at the forefront of renewable energy generation.

Through the application of Concentrated Solar Power (CSP) technology, solar radiation is harnessed in cells to produce medium – high temperatures the energy from which is used to drive conventional turbines. With advances in technology, these plants are now able to store the heat energy through the night, ensuring that the turbines are driven on a 24 hour basis.

Solar Thermal energy technology requires direct sunlight for production, therefore the €320 million site to be located in Spain will harness the high solar radiation levels of the region to maximise energy production from the plant.

Along with the climatic benefits of Spain, investment opportunities are boosted by the presence of a feed-in tariff protected by Royal Decree, legislation which obliges utility companies in the region to purchase the renewable electricity at rates above market prices. The feed-in tariff mechanism has been used successfully in a number of countries as a way of off-setting the obvious costs involved in renewable energy production. This in turn attracts investment by offering investors consistent high yields over a long term period.

The product offered by solarfeedintariff.co.uk will use the Spanish feed-in tariff mechanism to offer investors revenue streams of around 9-10% p/a over a long term period. This power plant investment scheme is also insured to guarantee to investors that the plant construction will be kept to timescale and also, that the plants productivity once active, will be at the highest possible level.

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Spain gives perhaps the best case example of how a strong feed-in tariff system can either make or break the solar industry in which it is introduced. The Spanish feed-in tariff (FIT) was designed as a mechanism for incentivising investment in solar installations and was introduced in 2007. Traditionally, the high cost of solar plant and installation deterred investors who identified that despite the high levels of solar radiation across the Iberian Peninsular, yields would be minimal at best simply due to high initial outlays.

The FIT is a system which guarantees fixed, premium rates for solar producers who feed electricity in to the national grid. The high rate paid for each unit of electricity is met by the utility companies who in turn spread that cost over their customers. Therefore, in Spain with the introduction of the tariff system in 2007 with the rate of 0.44 euros offered for units of energy fed-in to the grid by solar producers the interest generated in the Spanish photovoltaic (PV) market was overwhelming. Indeed, combined with extensive coverage from the Spanish media along with Zapatero’s PSOE government’s commitment of making Spain the leading producer of solar energy in Europe by 2020, there was a phenomenal boom in the PV sector with the number of solar installations rising dramatically.

The UK government and in particular the Department of Energy and Climate Change (DECC) since passing the Energy Act in 2008 have been moving towards a similar tariff system and in June 2009 announced that they would introduce a Clean Energy Cash Back system in the first quarter of 2010. In order to do so, they have undertaken a meticulous consultancy process in order to ensure that the mechanism which is introduced does exactly what it is intended to do i.e. make the UK solar industry strong and viable in the long term by attracting investment in the young sector. Spain certainly offers an example of how to attract investment in the short term. However, the Spanish example also offers stark examples of how not to set up a tariff system for long term industry health. The essential problem with the feed-in tariff which was established in Spain was that it was unable to cope with market fluctuations which arose as a result of the initial success of the tariff.

A recent report by the New York Times highlighted the failings of the Spanish solar legislation. Problems stemmed from the fact that politicians expected a steady stream of investment over a period of years. However, the massive interest which was generated in the fledgling industry encouraged a wave of investment in the first few months. The massive take up of solar installations was unexpected and caused the Spanish government to reduce solar incentives by 30 per cent without warning. Because the Spanish feed-in tariff failed to be market responsive, many investors who had already ordered deliveries of solar product from China, were left in the situation that they had no market in which to install it. With regards to the Spanish legislation, Julie Blunden of SunPower Corp was quoted in the New York Times,

“The most important lesson, which everyone has learned, is that if you’re going to establish a feed-in tariff, you need to figure out how to make it market-responsive.”

This will be the key lesson for the British government, how to introduce legislation which encourages growth in the new solar industry without setting a tariff level which is too high. In Spain, the government’s level of 0.44 euros was artificially high and therefore created the problem of an influx of investment which the government could not manage. Therefore, when the PSOE government reduced incentives by 30 per cent with many investors having already ordered large quantities of solar plant from manufacturing bases in China, the proverbial rug was pulled right from under them. Talking specifically about the legislation changes which had the detrimental effects on the Spanish PV market Santiago Seage, the CEO of Abengoa Solar SA commented on the situation saying,

“What’s important for the regulation of solar is stability. Unfortunately, up to now, we have had too many changes and if the context changes, you can make mistakes in business decisions.”

Spain has already experienced a dramatic reduction in photovoltaic installation in 2009 with 375MW compared to 2008 installations of 2,500MW. Spain will now fail to live up to its ambitions of becoming the European Union’s leading renewable energy producer by 2020 essentially because Zapatero’s government has neglected the tariff scheme across the country. The introduction of a 500MW project cap along with the withdrawal of essential subsidies has seen the solar industry stagnate and since the new year, decline. Members of the solar industry in the UK will therefore be hoping that the British government emulates the example of Germany rather than Spain in the way that they choose to roll out the much talked about feed-in tariff next year.

The We Support Solar group has launched a campaign for the government to add 10p to the proposed feed-in tariff, set to be implemented in the first quarter of 2010. The introduction of a UK feed-in tariff was set out by the government in July and has given the We Support Solar group some cause for concern regarding the long term effectiveness of making the UK solar industry competitive with those of Germany, Belgium and the Czech Republic. In a move set to highlight certain deficiencies in the proposed tariff legislation the We Support Solar website is currently urging people to petition MPs via their website with suggestions for the tariff before the consultation period finishes within the next few weeks.

The main concern among the solar industry lobby, most vociferously voiced by the members of We Support Solar, is that the rate paid by energy companies for electricity by means of solar energy will not be high enough to attract investment in the new UK sector. Indeed, the We Support Solar website has quoted that a failure to act on this particular piece of legislation would see the UK fail to catch up with its EU competitors on solar installation.

Citing the benefits of adding 10p to the proposed feed-in tariff the We Support Solar website claims the following advantages for the UK economy:

• 28,000 UK skilled solar power jobs by 2014
• Over 400,000 new residential solar PV installations by 2014
• Additional investment in UK solar PV manufacturing building on established centres in Wrexham, South Wales and County Durham

Certainly, with the announcement from Downing Street this year that Gordon Brown is planning to instigate a ‘green new deal’, using new renewable energies to revitalise the flagging economy, government action following the consultancy process will be under the microscope. The online campaign ultimately requests that MPs contact Ed Milliband, Secretary of the Department of Energy and Climate Change (DECC) to lay out these specific demands. Whether or not the government does act to introduce a truly workable tariff system will determine whether recent rhetoric represents a real desire to fight climate change or merely court the ‘green’ lobby at a difficult time for Brown’s premiership.

For more information on the campaign, please visit:

http://wesupportsolar.net/act-now/