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Six things to put in your response to the feed-in tariff consultation

Posted by Cathy Debenham on 16 March 2012 at 12:39 pm

Government will take note this time, so make sure you respond to the current consultations on the future of the feed-in tariff, says Solar Trade Association PV specialist Ray Noble.

"Because they already had an overspent budget to defend, they didn't take notice of last October's consultation," said Noble, speaking at the Solar Power UK Roadshows this month. "However, they have found a further £1.1bn pot of money for the feed-in tariff and now they are listening."

Noble predicts that prices will not fall any more this year, and probably not next year. Despite this, and the proposed tariff levels, he is upbeat about the future for the solar industry. "1GW this year is worth having", he says. "It's still an industry.

These are Noble's recommendations on how to respond to the consultation:

1. Cutting the solar PV tariff from 25 to 20 years for new generators

This will bring solar PV into line with the other technologies. When the FiT was introduced PV was the most expensive technology, so it needed a longer payback. Now it is the cheapest, it makes sense to reduce the tariff period.

2. Deployment dates

The consultation sets out a range of possible tariffs from July 2012, and proposes that the tariff is set based on deployment levels of solar PV in March and April this year. Noble predicts another mini goldrush for solar PV at the 21p feed-in tariff rate during these months, and is strongly opposed to the choice of March and April as period to determine future tariffs.

3. Tariff rates

Even though PV prices are not expected to fall this year, the highest proposed rate (16.5p per kWh for systems up to 4kWp) can work for both industry and consumers according to Noble. Installers will need to look at ways of being more efficient; and energy prices are likely to continue to rise. Both these measures will help keep return on investment stable.

4. Export tariff

The 3p export tariff was originally set as a minimum with an expectation that energy companies might offer alternatives to win customers. In fact, all companies have stuck with the bottom rate. Noble recommends that it be increased to a minimum of 5p.

5. Index linking

The consultation asks whether the tariff should continue to be index-linked, and if so, should it continue at RPI (retail price index) or go to the lower CPI (consumer price index). Noble's take is that the index-linking is important to compete with ISAs, but CPI is a concession that wouldn't hurt too much.

6. Degression

The installed pricing may not drop at the rate that DECC has predicted, and if industry stalls because it doesn't Noble suggests respondents should ask DECC to cater for this by postponing planned degression.

With the government's option C (16.5p per kWh for up to 4kW) plus 5p export tariff Noble predicts the following will be viable:

  • Domestic - what he calls the ISA market
  • Solar fields in the south of England using ROCs
  • New build - FiT rate is less relevant here as builders have to meet carbon ratings

Possible:

  • Social housing (the benefit of aggregation is not as great as the government thinks)
  • Commercial buildings
  • Carbon savers and brands who benefit from walking the talk.

Won't survive:

  • Free solar

Consultation 2A just covers Solar PV. It closes on 3 April 2012, and changes will be implemented from 1 July 2012.

Consultation 2B covers all aspects of the feed-in tariff. It closes on 26 April 2012, and changes will be implemented from 1 October 2012.

Photo by London Permaculture

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Comments

8 comments - read them below or add one

Cathy Debenham

Cathy DebenhamComment left on: 21 March 2013 at 12:13 pm

Hi Ed, the FIT rates for existing installations will go up by the RPI in April. It's on my list to chase up and do a blog in the next week, so keep an eye on the blog section.

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Kontiki

KontikiComment left on: 21 March 2013 at 10:41 am

Is there any information on FIT for 2013/14. This is for PV systems installed before 2011. I can't find any simple information on the FIT & export rates for existing installations. Ed

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Cathy Debenham

Cathy DebenhamComment left on: 29 March 2012 at 9:19 am

Hi Fred.

If you invest in an ISA you will get your capital back, and with solar PV you won't, so you're not comparing like with like. A more direct comparison would be with an annuity.

To see how DECC calculates the rate of return click here.

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Fred1

Fred1Comment left on: 28 March 2012 at 10:44 am

I am confused by the proposed tariffs and rates of return, perhaps someone can clarify. It seems that 4kwp systems are being offered at £6,000 to £6,500. It appears that DECC are targetting a return of about 4.5%.

If I invest £6,500 in an ISA at 4.5% I will get £292.5 a year.

If I invest in solar panels and get 13.6p per Kw generated, for a 4kwp system which produces 3,000kw I will get £408 per year, in addition I would get a deemed export payment of £46.5, I could potentially use half of my generated myself and save say 1500 Kw at say 13p which is £195.

In total my income and savings would be £649.5 or around 10%

Since DECC are targetting 4.5% they are being far too generous setting the proposed tariff in July at 13.5p, to get 4.5% it should be set much lower at around 3p per kw , once usage saving are accounted for.

Am I missing something ??

Thanks

Fred

 

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Cathy Debenham

Cathy DebenhamComment left on: 28 March 2012 at 8:06 am

Hi Fred. I think that after July 10% returns are history. The feed-in tariff was originally intended to deliver 5-8% returns, and in the recent consultations the government has stated that for smaller solar PV installations they are aiming at keeping the return at around 4.5%. 

My impression from all the talks I've been to recently is that no one expects module prices to fall much more, but that there is room for inverter prices installation costs to fall too. The other key factor on rate of return is how fast energy prices rise.

Also, the degression is going to be triggered by amount of kW installed, and while they won't put the rates back up if the industry slows, and less than expected is installed, they might postpone a degression.

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Fred1

Fred1Comment left on: 27 March 2012 at 8:38 pm

Looking at the current rate of installation I would expect to see more than 200mw installed in the next two months. DECC lost their appeal, so have less money to spend in the future on new tariffs.

I expect that  Option A as proposed, or even lower than this, will be adopted.

This is 13.6p from July 2012 for well insulated homes or 4.7p for less well insulated homes.These rates are set to fall by 10% every six months 12.9p by Oct 2012 or 4.5p.

At the lower rate a 4kwp installation would have income of £135 per year so for a 10% return would need  only cost £1,350 fully installed. I guess it will be autumn at least before costs fall that far

Fred

 

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James@Joju

James@JojuComment left on: 18 March 2012 at 4:24 pm

I agree with most of Ray’s comments, but not the implicit acceptance of the scale and unpredictable nature of the proposed cuts. As he acknowledges this would especially effect ‘mid-sized’ installations eg 4-50kW. The votes may be in domestic installations, and indeed they are important, but in terms of carbon/pound the larger systems are even better. Yet rates are being proposed which are frankly a turn off for investors. Worse than that, they would change every 6 months, with only 2 months notice. Decision making on solar projects often takes months, and nearly all systems in this size bracket require planning permission which can take forever.

The burden on consumers of the feed in tariffs are being heavily overstated at the moment (see my blog on solar helping to keep electricity prices down) but even if you accepted the idea of a budget cap the DECC proposals are too drastic.

So in terms of timing I will be saying that July 1st is too soon for more cuts, and that non domestic systems need 6-12 months notice of changes, or a pre-accreditation scheme as proposed in the consultation for wind and biomass. Below 4kW monthly changes in FITs would help smooth out the peaks, provided rates were fixed at least 3 months in advance.

Export rates should be reviewed as often as FIT rates, and adjusted to be kept in line with mean daytime wholesale prices, which is certainly more than 3p.

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BobA

BobAComment left on: 16 March 2012 at 2:46 pm

I very much agree with Ray Noble's assessment - the move to 20 years and CPI are sensible.  Not sure why there is a need to increase the export tariff though - if anything I would suggest removing the export tariff all together to encourage more local use of the energy produced. 

According to Rachel Solomon Williams, Head, Feed‐in Tariff Review, "...the overall aim is to drive the uptake of decentralised energy and engage communities and individuals with the Green Agenda."

Killing off "free solar" is in my view the right way to go as 100% of the income (including the deemed 50% export from the FIT goes to the "rent a roof"  company and none to the homeowner - the so called "free" electricity is a very, very small cost saving to the homeowner.

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