With the government’s consultation on proposed cuts to the feed-in tariff drawing to a close, solar industry members are anxious to see how drastic changes to the tariff will be. Many involved within the UK solar industry are fearful that reductions in the solar tariff of up to 70 per cent for pv energy generators over 50MW. Whatever the nature of changes to the solar feed-in tariff mechanism, it is more than likely that the worst affected will be large scale installations such as the large scale solar farm sites which were looking to tap into tariff revenue.

The solar feed-in tariff works by guaranteeing fixed, premium rates for units of energy both used and fed-back into the grid by small scale pv generators. The government has made it clear that it would like to see households benefitting from this scheme rather that large scale projects. Indeed, smaller scale solar businesses have argued that this change is necessary to ensure that funding goes to those areas which most need capital. While this may be the case, other solar businesses have stressed vehemently that strong tariff support for larger scale projects is essential as it will be those projects whch drive the industry, bring costs down and of course put impetus on technological innovation.

Whatever the differentiation between small and large scale projects made by the Department of Energy and Climate Change (DECC), the essential fact is that reducing the feed-in tariff will harm the UK solar industry by significantly reducing investor confidence in solar projects. All previous research and experience from abroad has shown that a strong tariff system is needed in order to provide investors in solar pv with long term returns on investment protected by government legislation; where these tariffs fall by the wayside, investor confidence in ROI tends to as well. Many within the industry have therefore been lobbying the government incessently, trying to convince the DECC of the need to rethink proposed cuts. Leonnie Greene of the Renewable Energy Association stated that,

“Our view is that the overall ambition is much too low and the government clearly does not understand the strategic importance of solar. We are going back to a scenario where a few wealthy green home owners can install solar, when we want to be widening access to solar, particularly through community scale projects.”

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.”

Britain‘s controversial Energy Bill was passed yesterday, signalling a significant move towards the use grid connected, renewable energy sources across the UK.

The new laws will see the UK cut gas emissions by 80 per cent by 2050 and open the door for feed in tariffs, with the Government paying owners of grid connected solar and wind systems a premium rate for the energy they produce.

Environmental groups and members of the renewable energy industry have warmly welcomed this new legislation. The Renewable Energy Association released the statement,

“The Renewable Energy Association is delighted that that government has recognised the advantages of a tariff-style incentive scheme which will open doors for small-scale producers of renewable heat, electricity and bio-methane,” Philip Wolfe, Director

It is generally accepted that the progressive feed-in tariff policies of European countries such as Germany, France and Spain have stimulated and accelerated the growth of renewable energies there.