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YouGen Blog

Thoughts on the future of the feed-in tariff

Posted by Cathy Debenham on 15 November 2011 at 5:13 am

Proposed cuts to the feed-in tariff for solar PV are too fast and too deep say both industry and consumers affected by the changes. While most people agree that the feed-in tariff rates were too high, and needed to be cut, the speed and severity of the change is a severe blow.

It's hard to understand why is a minister who says he wants to avoid boom and bust in the solar PV industry is introducing a policy that does just that.

The solar feed-in tariff has proved far more popular than expected, and the rate of installations of solar PV has grown much faster than anticipated as a result. But isn't that a good thing? Solar panels on people's roofs are a very visible sign of a move to a lower-carbon economy. While they may not be the most cost-effective way of getting there (yet), there is evidence that panels on roofs get people talking, and begins to normalise a different approach to energy.

They also mean that people engage with energy in a way doesn't happen with a quarterly post-dated bill and the solar panels help them to understand more about how it works. Anecdotal evidence indicates that people are more receptive to taking other energy efficiency measures as a result of installing solar panels.

In fact, the when you examine the aims of the feed-in tariff, solar PV appears to be performing well. On the consumer side it meets all three of the scheme's stated aims:

  • To promote take-up of small-scale low-carbon electricity technologies by the public and communities;
  • To empower people and give them a direct stake in the transition to a low-carbon economy; and
  • To assist in public take-up of carbon reduction measures, particularly measures to improve the energy efficiency of buildings.

The fourth aim is to help develop a supply chain that offers households a wide range of cost-effective measures to lower their energy use and carbon emissions. The solar industry has started well on this. Estimates vary, but between 25,000 and 30,000 jobs have been created since the start of feed-in tariffs. Prices have fallen significantly - anywhere between 30-40% (says the industry), or up to 70% (according to government calculations). Not bad for a new industry, in a recession.

So why the sudden slashing of what many see as a success story? Well, those aims are wrapped up in words like "affordable" and "cost-effective". It's all about the budget. This is the same budget that the Coalition government chose to reduce and cap in the comprehensive spending review. (As the money comes from a levy on energy bills, and not from the Treasury, the cap wasn't strictly necessary. Labour's original scheme did not have one).

Given that the feed-in tariff for solar PV appears to be successful in meeting the stated aims of the scheme, would it not be possible to find more money and increase the budget? Are there other aspects of low carbon spending that are underspent and could be transferred? Or, having chosen to cap the budget, couldn't the self-styled "greenest government ever" choose to uncap it (some might argue that it's a better use of the money than Eric Pickles' U-turn on weekly bin collections).

Once a little bit more money has been found, here are the YouGen suggestions for how the solar feed-in tariff might look going forward:

1. Extend the deadline for cuts, ideally to the 31 March 2011, so planned and contracted installations can go ahead, and to give industry time to adapt to the new tariffs (and minimise redundancies.

2. Introduce a generous tariff for community installations. The emergence of many local energy projects, raising money locally to generate electricity genuinely owned by the community is one of the most encouraging and useful aspects of the feed-in tariff. It is a powerful way of involving and engaging people in new ways of doing things, and, most importantly, getting their buy in.

3. Drop the proposal to limit the feed-in tariff to the small number of homes that meet the Energy Performace Certificate (EPC) level C. According to the English housing survey housing stock summary statistics 2009, just 13.8% of UK dwellings were graded C and above. Delve a little deeper into the stats, and you find that only 9% of houses have EPC of C or above. Flats tend to be more energy efficiency with 33.9% reaching the standard.

For some of the most hard to treat homes, off the gas grid, with no cavity walls, solar PV is a useful way of combatting fuel poverty, and reducing domestic carbon emissions. Prescribing which order people take energy efficiency measures is more likely to kill solar PV stone dead in the UK than either the size or the speed of the cuts.

Measures, such as solid wall insulation, are very disruptive, and quite a hard sell. Whereas solar PV has been demonstrated to be a good way of helping householders and businesses to engage with and understand their energy usage. For hard to treat houses it is an easier first step, and will help people to see the benefit of lowering energy use, and encourage them to go on and do the more disruptive measures.

These points will form the basis of YouGen's response to the consultation, but we are keen to also reflect our readers thoughts. Please leave your comments below.

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Comments

4 comments - read them below or add one

NorthGlosEPC

NorthGlosEPCComment left on: 28 November 2011 at 2:14 pm

Cathy,

I have some sympathy with your first two points.

I'd actually like to see the Solar PV FiT remain at 43p but financed from general taxation rather than from energy bills, because that includes money from people at fuel poverty level who could never get in on the game. I believe a reduction to 21p makes what was just about economically viable now non-viable whenever it is implimented. I don't think the Solar PV industry will be able to adapt by lowering installation cost enough to restore viability so the number of new installation is going to plummet.

I certainly agree that community projects should benefit from even greater FiT support. To me a community project is more attractive than to simply provide an investment platform for the better off individual, even though I can still accept the continuation thereof.

Where I would disagree is with your proposal to drop the idea of limiting FiT to properties with lower than EPC level C rating. I think I can see why you propose this. It is to open up the number of properties that could receive the FiT and therefore increase potential takup. However to me it depends how you look at the whole issue of reducing fossil fuel Co2 output.

Energy produced by renewable might be free at source but conversion to something we can beneficially use most certainly is not. Even if the FiT goes to 21p per unit that is still very expensive energy and someone (all of us) will be paying. Therfore to my mind a drive toward energy efficiency must take priority over the drive to produce renewable energy. In practice of course we must still do both.

I feel that If you receive money in the form of the FiT essentially from the rest of us it's not unreasonable to expect some of the energy produced not to be wasted by venting it into the atmosphere through the fabric of an inefficient property belonging to the FiT recipient.

Doesn't matter if it is actually the same energy. The principle is that overall it is better to conserve (not use) than to make more at higher cost. The simple economics are it is better spend on improving efficiency first and then we'll get the greatest benefit from the expensive renewable.

In reality a C rating is reasonable. Cavity wall and loft insulation, double glazing and a half decent boiler will in the vast majority of cases get you to an EPC level C rating. I'd suggest this is certainly where you'd want to be before thinking about Solar panels anyway.

Yes there will be older properties with solid walls, or old system builds, or listed building where getting to a C rating is expensive but for the vast majority it is a very reasonable realisable minumum level.

 

 

 

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Marath0nman

Marath0nmanComment left on: 16 November 2011 at 4:28 pm

Cathy,

I think we are missing something important here, but would like someone technically to confirm my thoughts. The Govt's impact assessment estimates that if the FIT scheme is left unchanged 12300 gigawatt hours (12.3 terawatt hours) of solar output will be installed by 2020-21.

A typical nuclear power station has an annual output of 6 Terawatt hours

That means by leaving the FIT scheme unchanged we can have the equivalent of 2 nuclear power stations of green energy in a fraction of the time and cost to produce one nuclear power station ie at a cost of £25 per household on energy bills in 2020.

Cutting the Fit is a real lost opportunity, and I wonder if the big 6 energy companies are behind this?

Charles Mossman


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@adrianenact

@adrianenactComment left on: 15 November 2011 at 1:01 pm

Unfortunately I believe that damage has been done with the 12th December deadline.  Most companies will have stopped taking orders soon after the announcement was made and are already quoting customers on the new FiT rates.  I am sure this was a calculated risk by DECC to kill demand quickly so on point 1 I think the best compromise we can hope for is that everyone who had paid a deposit and placed an order before the announcement was made is allowed to register their FiT.  This will prevent any unintended consequences of customers who have had their systems installed by the 12th but miss registration due to a host of reasons from DNO connection approval through to potential system failures at MCS or the FiT Licensees.

On point 2 whilst I believe that community schemes are being looked at by DECC, I am sure they will take the cold view that their aim here is to install renewable energy at as low a cost as possible and paying a community group more for their electricity than an individual householder makes little sense to the Treasury.  What may make more sense is to see other funding from the likes of the Energy Savings Trust or the EU to help fund the formation and management of the community cooperatives as these funding sources are better aligned with the aims of these groups than the FiT.

Finally I am also very concerned about the C rating rule.  If implemented it will create a significant barrier to entry which no doubt will please DECC as it will slow down the FiT spend rate.  I am all in favour of people upgrading their home's energy efficiency before installing PV but any link to a C rating or the installation of Green Deal works must be delayed until 2013 when Green Deal will have actually started and ECO funding is available for solid wall insulation for older homes.  Until then why not just insist on loft and cavity wall insulation which is free now and probably will be till the end of 2012 through the Carbon Emission Reduction target?

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Linn Rafferty

Linn Rafferty from JTec Energy PerformanceComment left on: 15 November 2011 at 12:31 pm

Cathy, I agree with points 1 and 2, but clearly not with your point 3.  It's a good thing that householders are encouraged to improve the general energy efficiency of their homes when they add PV.  Don't forget, PV is itself an effective energy efficiency measure, and in itself will improve the energy efficiency rating of the home.  It's quite possible that some D rated homes would achieve a C simply through the addition of PV alone.

The main point of having an EPC rating threshold is to ensure that all homes are treated on an equal footing.  You could certainly argue that a C rating is setting the bar too high and I'd agree with you there, but please don't ask them to remove the bar altogether.

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