The Government has today announced plans to ensure the future of the Feed-in Tariffs scheme to make it more predictable. Transparency, longevity and certainty are at the heart of the new improved scheme.

The reforms will provide greater confidence to consumers and industry investing in exciting renewable technologies such as solar power, anaerobic digestion, micro-CHP, wind and hydro power.

The Feed-in Tariffs (FITs) scheme provides a subsidy, paid for by all consumers through their energy bills, enabling small scale renewable and low carbon technologies to  compete against  higher carbon forms of electricity generation.

The surge of solar PV installations in the latter part of last year, due to a 45% reduction in estimated installation costs since 2009, has placed a huge strain on the FITs budget.

Climate Change Minister Greg Barker said: “Today we are announcing plans to improve the Feed-in Tariffs scheme. Instead of a scheme for the few the new improved scheme will deliver for the many. Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry.  We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.

“I want to see a bright and vibrant future for small scale renewables in the UK and allow each of the technologies to reach their potential where they can get to a point where they can stand on their own two feet without the need for subsidy sooner rather than later.”

A BETTER FIT SCHEME FOR CONSUMERS AND COMMUNITIES

• A tariff of 21p/kWh will take effect from 1st April this year for domestic-size solar panels with an eligibility date on or after 3rd March 2012. Other tariff reductions apply for larger installations.
• The Department has listened carefully to feedback on the energy efficiency proposals that we put forward in the consultation of 31st October. Properties installing solar panels on or after 1st April this year will be required to produce an Energy Performance Certificate rating of ‘D’ or above  to qualify for a full FIT. The previous proposals for a ‘C’ rating or a commitment for all Green Deal measures to be installed was seen as impractical at this stage. We estimate that about half of all properties are already eligible for a ‘D’ rating.
• From 1st April 2012, new ‘multi-installation’ tariff rates set at 80% of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. This reflects the lower costs of such installations, as they benefit from the economies of scale. Based on the feedback  received, the threshold is set at more than 25 installations. Individuals or organisations with 25 or fewer  installations will still be eligible for the individual rate. DECC is now consulting on a proposal that social housing, community projects and distributed energy schemes be exempt from these multi-installation tariff rates.
• The tariff for micro-CHP installations will be increased to recognise the benefits this technology could bring and to encourage its development.

A BETTER FIT SCHEME FOR INDUSTRY

• In line with the evidence of falling costs for solar PV, DECC is proposing to peg the subsidy levels to cost reductions and industry growth to provide more certainty for future investments.  This will ensure that subsidy levels keep in step with the market. It builds on the best of the existing German system and will remove the need for emergency reviews.
• Using budget flexibility to cover the overspend resulting from high PV uptake this year, while still allowing £460 million for new installations over the Spending Review period. This won’t have any impact on consumer bills beyond the agreed overall cap on renewable subsidies as it will primarily be funded from an under spend on the budget allocated for large-scale renewables.

Wadebridge, sitting in picturesque North Cornwall is a sight to behold with its abundance of solar panels furnishing rooftops with not inexpensive solar pv equipment. This concentration of roof mounted solar pv panels in Wadebridge has not occurred by chance, rather it is the result of a project designed to make the Cornish town the first in the country to be powered by solar energy.

The project, known as the Wadebridge Renewable Energy Network or WREN is a scheme which hopes to meet self set targets of generating a third of its electricity from solar by 2015. By hooking into the government’s feed-in tariff mechanism WREN has hoped to install projects throughout the town and of course off sets costs through the tariff scheme. With bold targets of installing 7MW by 2015, Wadebridge could become a potential beacon for wholesale community solar projects in the UK but of course also reflects the fickle nature of an industry completely reliant on government tariff legislation.

The feed-in tariff enables small scale solar pv generators to generate revenue for the electricity produced and consumed by solar projects. Through the feed-in tariff WREN has projected that it could potentially generate £2.5million over the project’s 25 year life span with the money being reinvested back into other green energy projects. Recent announcements of the cuts to be made to the tariff could prove detrimental to Wren’s plans and the potential for healthy yields over the course of the project.

Stephen Frankel, the founder of Wren explained that,

“In contrast to recent green announcements, their success could be limited due to Government proposals to restrict the size of solar installations in the UK”.

“Proposals to limit the Feed-in tariff, payment for clean electricity, to small 50kWp systems means the town wouldn’t go ahead with mid to large scale projects which would bring much needed income into their community fund and help the town meet their renewable energy targets”.

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.”

Through studying the UK solar industry in the wake of announcements of cutbacks in the solar feed-in tariff, IMS Research has concluded that the future looks very uncertain, if not bleak. Recent news that the government is set to reduce the aforementioned tariffs has been bemoaned by members of the UK solar industry and has been reflected in the findings from IMS. The feed-in tariff offers fixed, premium rates for units of energy both generated and fed back into the grid by renewable energy generators and is essential in off-setting the obvious costs in installing solar pv panels.

The government and in particular the Department of Energy and Climate Change (DECC) has made it clear that they would like to stifle investment in large scale ‘solar farms’ and instead concentrate on household roof-mounted solar projects. This, IMS believe will destroy the potential for industrial scale solar projects in the UK, something which they suggest will be the downfall of the industry in this country. Certainly, where feed-in tariffs have proved successful elsewhere, larger scale projects have proved extremely effective in helping to create competition and bring costs down over a longer term.

IMS Research has stated that,

“Effectively making solar energy uneconomic for commercial organisations demonstrates the Government’s lack of commitment to renewable sources. It also has an implication for the management of public buildings, such as hospitals and schools, for whom solar power will no longer be financially viable. Limiting solar power to small-scale installations means the sector will simply never take off, other than creating a niche industry. And while countries such as Japan, Italy, Germany, China and the U.S. have said that they will be giving greater financial support to solar power and already have substantial solar PV capacity in place, the UK government has taken the opposite approach, making it clear that nuclear energy is definitely part of the plan for power generation in the UK.”

At a time where job cuts appear daily in national newspapers and politicians expound the notion of a return of a British manufacturing sector, the reduction of solar feed-in tariffs for industrial scale projects is unsurprisingly being met by criticism. It will be hoped that the government does not retract tariffs any more than it has done, otherwise UK solar may just not survive infancy.