New proposals for the solar PV feed-in tariff and what they mean for microgenerators
Posted by Cathy Debenham on 9 February 2012 at 5:19 pm
Last year the government announced that the feed-in tariff rates for solar PV would be cut in half from 1 April. Today it announced that it plans to make two more significant cuts in rates this year.
The consultation on cost control for solar PV FITs has some good ideas for the future of the solar PV in the UK.
- There's more cash available for the scheme, transferred over from the renewable obligation, and
- It outlines a robust sounding system for avoiding the out of control boom that happened at the end of last year, with a system of planned degression. This will provide more certainty for industry and consumers
But, and it's a big but, the cuts in rates are so severe that many industry figures think that prices of solar installations are not going to fall fast enough in the next year to make the new rates attractive. Even DECC's impact assessment anticipates the a third of UK solar jobs will go in 2012/13. This doesn't sit well with its rhetoric. "Instead of a scheme for the few, the new improved scheme will deliver for the many," said Climate Change Minister Greg Barker.
Renewable Energy Association chief executive Gaynor Hartnell said: "For solar power, the FITs have an important role in tiding us over to the point where solar panels no longer need subsidy. On present trends this won’t be far away, but it will be delayed if we go backwards and starve the industry by reducing the tariffs too fast. These new tariff rates will be very challenging as the reductions seen over the past 12 months are unlikely to be repeated, because of global trade trends."
What rates is it proposing?
From 3 March to 31 June 2012 the rates for solar PV installations up to and including 4kW will be 21p for every kWh generated (rates for those eligible between 12 December 2011 and 2 March are still unclear, subject to ongoing legal action). Prior to that the rate was 43.3p per kWh generated.
From 1 July the government proposes to reduce the generation rate to between 13.6p and 16.5p depending on the overall level of installations during March and April 2012. The higher the number of installations, the lower the tariff. These rates will only be applied for new installations from that date.
How will it manage future rate changes?
It is proposing a 5% decrease in all the rates on 1 October 2012, then an automatic 10% degression every 6 months. In also has an option to bring forward the degression date if the deployment of solar PV exceeds 125% of expected levels (it would give two months notice of any change of this nature). The expected levels of deployment will be published in advance by DECC.
In addition it will have an annual review "to check that the system is working well". This plan would have FIT tariffs falling to between 7.7p and 8.8p per kWh for people who install 4kW or less in April 2015.
In doing this, the government is planning to move away from rate of return as a measure, and will instead calculate levels of deployment, and make assumptions about what price cuts would come at each level of deployment.
The government is also considering the following changes for new entrants to the feed-in scheme:
Indexation of the tariffs
Whether tariffs should continue to be index-linked, and if so whether it should be to the retail price index or the consumer price index.
It is reviewing whether the level of export tariff reflects the real value of FIT exports, whether to increase the export tariff rate, and if so, whether to make a proportionate reduction in the generation tariff. (Any change would only be for new entrants to the scheme).
Shorten the life of the tariff
It proposes cutting the life of the solar PV FIT from the current 25 years, to 20. This would bring it in line with the life of other technologies. The reasoning behind this is that it was originally set to reflect the life of the solar panels. However, new assessments put the life of solar PV at longer than 25 years. In addition, the time horizon of investors tends to be shorter - 10-15 years - leading the government to assume that they are likely to be indifferent to longer term returns at the time of investment.
These proposals are up for consultation. You can download the consultation document by clicking here. The closing date for responses is 3 April 2012.
Photo by Thomas Hart
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