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Government loses feed-in tariff appeal, but uncertainty continues

Posted by Cathy Debenham on 26 January 2012 at 9:54 am

While the government failed to overturn last month's ruling that its rushed cuts to the feed-in tariff for solar PV are unlawful yesterday, the uncertainty over the rates still exists. As soon as the unanimous verdict was announced in the Court of Appeal, the Secretary of State for Energy and Climate Change, Chris Huhne announced that his department would seek permission to appeal to the Supreme Court.

What does this mean?

As a result, people who want to install solar panels between now and 3 March 2012 still do not know what rate of feed-in tariff they will get. If the government is given permission to appeal to the Supreme Court, and then wins the appeal, the rate will be 43.3p until 31 March this year, then 21p for the remainder of the scheme. Otherwise it will be 43.3p per kWh generated for systems up to 4kW in size for the 25 year duration of the scheme. The 3.1p per kWh export rate is not affected. See here for rates for larger installations, and full information on the feed-in tariff.

Why is this happening?

Good question: At the time of the judgement yesterday, Greg Barker, Minister of State at DECC tweeted: "Win, lose or draw today, important we move forward together, drive down costs + step up deployment." Then his department moved swiftly to ensure that the uncertainty that faces consumers and the industry will continue. Judging by the contents of tweets he's received since, the industry doesn't class this as "moving forward together"!

My analysis is that it's a move to protect the (already overspent) feed-in tariff (FIT) budget from another mini boom. If the rate had been confirmed to be back at 43.3p from yesterday, solar installers' phones would have been ringing off the hook with people trying to get a system installed in the next 38 days. With the uncertainty continuing, it's not such an appealing investment.

Is now a good time to buy solar PV?

Prices of solar panels have fallen considerably since the feed-in tariff was introduced, so while the tariff has halved, the rate of return hasn't fallen by the same amount. You can work out what returns you are likely to get using this spreadsheet (it has calculators for both the new and the old rate).

It will also depend on your attitude to risk. Four judges have now declared the way the cuts were introduced illegal, and it has also been slated by two parliamentary committees. If the Government fails to succeed in the Supreme Court, everyone who installs solar PV between 12 December 2011 and before the 3 March 2012 will get the old rates. However, it would be unwise to go ahead unless you are happy with the return you get from the 21p feed-in tariff rate, as you may end up with that.

Given the overspend on the FIT budget, it is possible that the feed-in tariff rate will be cut again from 1 April. The government has also announced an intention to introduce strict energy efficiency criteria, which will make 80% or more households ineligible for the scheme without significant investment in energy efficiency.

What next for solar PV?

The government is expected to publish the results of its solar consultation on 9 February, and to set out plans for further changes to the feed-in tariff scheme, which could start from 1 April 2012.

Photo by Cindy Andrie

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Comments

1 comments - read them below or add one

banjax

banjaxComment left on: 26 January 2012 at 6:04 pm

Should the government be providing the most subsidy for the greenest or most efficient renewables?

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