Solar Energy Feed-In Tariffs

Earlier this year the Parliamentary Information Office of the Parliamentary Yearbook reported on the Government’s plans for detailed consultations with industry and consumers over the planned changes to the feed-in tariff scheme for solar energy. This will form part of a major feature on environment, sustainable energy and climate change in the next edition

October 2008 Feed-in tariffs in the United Kingdom were first announced in October 2008 by Ed Miliband, then Secretary of State for Energy and Climate Change. He presented details of the scheme, which began in early April 2010.

March 2011 The coalition government announced that support for large-scale photovoltaic installations (greater than 50 KW) would be cut. This was in response to European speculators lining up to establish huge solar farms in the West Country, which would have absorbed disproportionate amounts of the fund.

June 2011 The Department for Energy and Climate Change confirmed that Feed-in Tariffs would be cut for solar PV systems above 50 KW after 1st Aug, 2011. Many were disappointed with the decision of DECC, especially after long term consultations. In October 2011 DECC announced dramatic cuts of around 55% to feed in tariff rates, with additional reductions for community or group schemes. The cuts were to be effective from 12 December 2011, with a consultation exercise to end on 23 December 2011. This was successfully challenged in the high court by an application for judicial review, jointly made by the environmental pressure group Friends of the Earth (FoE) and two solar companies – Solarcentury and HomeSun. The judgment, made by Mr Justice Mitting after a two-day court hearing, was hailed as a major victory by green campaigners and the solar industry.

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.

May 2012 The Government announced the introduction of 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. 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 were calculated to give a return on investment (ROIs) of over 6% for most typical, well-sited installations, and up to 8% for the larger bands.

Today The final package of changes to the FITs scheme has been announced by the Department of Energy and Climate Change (DECC), following consultation in February this year. This is part of the comprehensive review designed to ensure value for money for the consumer and long term certainty for those who choose to invest.

The changes will affect tariffs for all newly eligible FITs technologies from 1 December 2012 onwards. Changes to solar tariffs, which have already been announced, will take place from 1 August 2012.

A degression mechanism will be introduced for Anaerobic Digestion (AD), wind and hydro from April 2014 in line with uptake of these technologies. Tariffs will be published two months before the degression date and will be based on publicly-available data. Decisions on the degression mechanism for solar were outlined in the Government response published on 24 May 2012.

Energy and Climate Change Minister Greg Barker said:

“I want to provide long term certainty for those choosing to invest in all forms of small scale green electricity generation, not just solar, and our changes to FITs will do just that.

“As well reducing tariffs over time for AD, hydro and small scale wind in line with uptake, we are introducing tariff guarantees for all technologies, great news for projects with long lead in times like hydro power.

“We are also planning to remove the energy efficiency requirement for community and school solar projects in recognition of the hard to treat nature of community buildings often involved in such schemes, and the educational benefits that they can bring. These types of projects will also be able to get tariff guarantees for installations of any size, making it easier for communities to get involved in clean green local energy generation.”

Dave Sowden, Chief Executive of the Micropower Council said:

“We welcome what is broadly a very positive set of proposals that should bring greater confidence to investors and customers. In particular the decision to increase the export tariff, the clarification of cost controls for microCHP, the community proposals and the decision not to extend energy efficiency requirements beyond PV are welcome developments.

“We will continue to monitor progress of the technologies supported by FITs with a view to maintaining constructive dialogue with DECC to inform further developments to the scheme.”

Paul Thompson, Head of Policy at the Renewable Energy Association said:

“These decisions demonstrate that DECC has listened carefully to industry concerns, and should restore certainty to the sub-5MW sector. We particularly welcome the support for community schemes and the improvements to the cost control mechanism. The introduction of tariff guarantees for projects at a relatively early stage is also very helpful, and we look forward to a similar approach being extended to the Renewable Heat Incentive.”

DECC is introducing a system of preliminary accreditation so all AD and hydro installations and larger wind and PV installations (over 50 kW) will be able to know before construction that they will be accredited. It will also provide certainty over tariffs for six months to two years depending on the technology. This means that if a developer gets their project up and running within the tariff guarantee timescale, they will get the tariff that applied at the time they applied for preliminary accreditation.

A system of advance tariff guarantees will also be available to non-domestic community energy PV projects up to 50 kW. A new hydro band for 100-500kW installations will also be introduced to ensure developers are incentivised to design their project at the most appropriate size.

“Community” FITs projects will be defined on the basis of existing tax law and community schemes will be exempt from the energy efficiency requirement (level D) introduced for solar from 1st April this year. Schools will also be exempt from the energy efficiency requirement even where they do not meet the definition of community scheme. Changes will take effect from 1 December, subject to Parliamentary and state aid clearance.

Renewable Heat Incentive

DECC has also today set out proposals to improve the performance and manage the future budget of the non-domestic Renewable Heat Incentive (RHI) scheme, providing greater certainty to the market.

To ensure the RHI budget is managed effectively, DECC is proposing to introduce a flexible degression based system. Under this system tariffs would be reduced for new applicants if uptake approaches pre-determined trigger points. Tests to see whether degression is needed would take place quarterly, and if a tariff reduction is needed, one month’s notice would be given. Progress towards the trigger points for each technology and the scheme overall would be monitored throughout the year and data published monthly.

Energy and Climate Change Minister Greg Barker said:

“The Coalition is fully committed to driving forward investment in renewable heat, and our proposals will make sure we provide the right support for the industry.

“We want to continue helping renewable heat to grow and flourish, providing long term certainty for those who choose to invest in it.”

DECC has set out plans to introduce greater environmental sustainability into the RHI through the inclusion of standards on Biomass sustainability (in line with the UK Bioenergy strategy published in April 2012) and a clear process for how the air quality regime will work. DECC is also looking to simplify the metering arrangements for the RHI, reducing the administrative burden on participants and taking views on the scheme from existing applicants into account.

DECC will continue to assess the workings of the RHI scheme and is proposing to review the scheme in 2014 to ensure tariffs for new applicants are still providing value for money.

We shall be adding to the article as there are further developments and any changes to the plans will be reflected in the content. The full report will be published in print and online in the next edition of the Parliamentary Year book.


About Parliamentary Yearbook

The Parliamentary Yearbook is a division of Blakes Media who have been publishing the definitive Parliamentary Yearbook for over 40 years; this has also been a successful on-line resource for many years. The Parliamentary Yearbook has three distinct functions: (i) To provide information on topical political, social and business issues to clients of the Parliamentary Yearbook and to members of the public, (ii) To carry out research into such aspects of public and business life that may be of interest to a wider audience for inclusion in reports and features within the Parliamentary Yearbook, and (iii) To assess the value of the publication to the potential readership in specific market sectors and ensure that the publication reaches the best possible target audience. If we can provide assistance to you please do not hesitate to contact the Parliamentary Yearbook.
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