The early review of the UK solar feed-in tariff has caused consternation within the industry, still in its infancy and reliant on the tariff for log term viability. Chris Huhne, Secretary of the Department of Energy and Climate Change made the announcement this week that the FIT would be reviewed in light of the “threat” to the scheme posed by large scale solar projects which have begun to take advantage of the scheme. This combined with the recent spending review which will make it necessary to cut 10 per cent from the tariff rates.

The feed-in tariff was introduced as a means of attracting investment in solar energy and greatly increasing uptake in solar pv panels in the UK. The tariff works by offering guaranteed, premium rates for units of energy both consumed and fed back into the grid for small scale renewable energy producers. This tariff has been very successful at attracting investors and manufacturers alike, all keen to tap into the revenue which can be generated from the feed-in tariff. However, Huhne believes that the feed-in tariff has perhaps been too attractive with a number of large solar farms developing under the system. The DECC secretary stated,

“Since the Spending Review, I have become increasingly concerned about the prospect of large scale solar PV projects under FITs, which . . . could, if left unchecked, take a disproportionate amount of available funding or even break the cap on total funding,”

Solar Trade Association spokesman, Howard Johns lamented this news saying,

This is really bad news for the solar industry in the UK. Last week Ministers welcomed the study showing that 17,000 jobs would be created by the industry in 2011. This week has seen them once again changing the goal posts and threatening investment and jobs in the sector.”

Much hope was pinned on Copenhagen and Cancun as a way of highlighting the case for renewable energy and prompting large scale investment in green energy. Government’s globally assumed that private investment would pour in, helping to bring the big world economies closer to meeting climate change targets, win votes and of course revitalise struggling economies with a vibrant green energy industry. As it was subsequently found out, the world financial crisis was such that rather than see the universal growth of green energy, some sectors were forced to make drastic, indeed devastating cut backs.

The world recession has had a detrimental effect in certain areas of renewable energy. Certainly Spain, once a world leader in solar pv thanks to its feed-in tariff policy suffered greatly from cuts made to the tariff by Zapatero’s government in the face of a Spanish economy on the brink of collapse. However, according to the Director of the UK Carbon Trust Ben Sykes, the recession has not necessarily meant a downturn in all sectors,

“The big, exciting stuff that was going to come out of a very successful global conference didn’t happen, but you have steady growth in a number of technology areas”

The world of finance certainly recognises that despite cut backs in certain areas of renewable energy, other sectors including solar pv have continued to go from strength to strength in the UK. Ever since the introduction of the feed-in tariff in April 2010, investment in solar energy has rocketed with an impressive uptake in solar panels taking advantage of the healthy profits to be made. With regards to efficiencies, the head of HSBC’s climate change centre of excellence Nick Robins stated,

“The learning curve has accelerated during the crisis, particularly in solar.”

The UK solar feed-in tariff, legislation which guarantees fixed, premium rates for units of energy either consumed or fed back into the national grid is designed to incentivise investment in solar energy, traditionally expensive to set up. Already the uptake in solar on the back of the tariffs has exceeded expectations with over 10,000 panels installed so far. As was predicted, the uptake in solar along with the growing competition in the UK market has caused prices to fall a little bit closer to ‘grid parity’, the holy grail of renewable energy. According to energy expert Anthony Froggatt, Chinese manufacturing volumes have led to grid costs being the equivalent of nuclear in the US.

UK farmers have been able to benefit from feed-in tariffs but as the government plans to review the sum paid for solar energy in 2012, now is the time to invest. The British government introduced feed-in tariffs under the guise of the Clean Energy Cash back scheme back in April and was designed as a way of boosting investment in solar photovoltaic (pv) energy which would help the UK meet climate change targets through the reduction of carbon emissions.

The feed-in tariff works by offering guaranteed, premium rates for units of energy both used and fed back into the grid from small scale solar pv generators. Where they have been implemented elsewhere, they have proved to be very effective mechanisms at incentivising investment in what were once expensive projects. However, government plans to reduce the rate of energy paid to solar pv generators after 2012 means that now is the time for UK farmers to take full advantage of the profits from solar panels.

Many landowners are already taking advantage of the tariff rate which guarantees a rate of 29.3p/kWh for units of energy generated from their solar panels. Certainly, with projects lasting for 25 years, there will be some very healthy profits to be made, something which has not gone unnoticed within the industry. Regen South West are just one example of solar energy specialists involved in rural solar projects. Chief Executive Merlin Hyman has described such projects as an ‘exciting opportunity’ and that they can offer,

“Essentially it is a guaranteed income for 25 years with a better return than if you were to put money in the bank at the moment. But it needs to be in the right place and on the right sites.”

The emphasis of finding the right sites has been echoed throughout the industry. Also, there has been a focus on the need to avoid fly by night installers keen to make a quick Buck and run in the great UK solar Klondike.

This is a view supported by solar pv exponents, Mole Valley Farmers who have their own demonstration solar site set up on their director’s land and are offering open day invites. Business Development Manager at Mole Valley, Andy Taplin has warned that,

“We are aware of lots of businesses popping up and calling themselves solar energy experts, what we’re trying to do is prevent businesses profiteering from our members.

Going on to add, “our main concern is that for these investments to work the solar panels need to last for 25 years to profit from the feed-in tariff — Mole Valley Farmers will be here in 25 years’ time, but I’m not sure some of these solar panel companies will be around once the gold rush is over.”

Ofgem’s Sustainable Development Focus has released figures showing that in the first 6 months of feed-in tariffs in the UK, over 11,000 generator have registered for the tariff, marking a considerable surge in solar photovoltaic installations in particular. Indeed, with 11,352 renewable systems installed, it indicates that the scheme has been more successful than predicted, with enough output to power around 35,000 homes.

Feed-in tariffs work by offering fixed, premium rates for both the energy generated from renewable systems (which is then fed-back into the grid), and the energy used. When first introduced by the Department of Energy and Climate Change (DECC), it was with the intention of incentivising investment in green energy by off-setting the costs of installing renewable energy systems by creating long term, guaranteed yields from the projects. Emulating schemes applied successfully abroad, it seems that in the first 6 months of operation, the tariffs have certainly been effective as a means of boosting renewable installations across the UK.

In order to get the UK grid network fully up to speed with the complex requirements of a low-carbon economy, the Sustainable Development Focus Report also published its proposals for updating the country’s network. Working on a framework of Revenue= Incentives+ Innovation+ Outputs (RIIO), Ofgem is planning on generating £32 billion of investment much needed to upgrade a UK national grid not yet ready for green energy and the mechanisms set up around it.

Alistair Buchanan of Ofgem wrote in a foreword to the report,

“This is the biggest change to the regulatory framework for 20 years and sets the network companies on a path to playing their full role in the transition to a low-carbon economy while delivering value for money for all consumers.”