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New feed-in tariff rate from July "probably won't be 13p"
Posted by Cathy Debenham on 18 April 2012 at 3:15 pm
"We have probably overestimated" the cost reductions for solar PV going forward, admitted head of the feed-in tariff review at DECC, Rachel Solomon-Williams, yesterday. Speaking at RegenSW's event on the current feed-in tariff consultations, she also gave a ray hope for feed-in tariff (FIT) rates going forward, saying "I'd be surprised if we ended up at 13p".
This refers to the lowest of the three tariff rate options that DECC is now consulting on, which would mark a significant cut from the current 21p rate of generation tariff for installations of 4kW or less from 1 July 2012. However, before you start skipping for joy, she added: "the most difficult thing for us is to pull out as much deployment as we can, as cheaply as possible, so final tariffs will probably be disappointing for industry."
Design of a degression system (how the feed-in tariff rates will decrease over time in relation to reductions in costs) was a key feature of the 2A consultation. Solomon-Williams reported that estimated costs of solar PV installation have fallen by 50% since the start of the scheme. However, predicting future cost reductions is not easy, so DECC is aiming to design a degression scheme that copes with the uncertainty.
Contributors from the audience agreed with respondents to the consultation that the estimates for future cost reductions outlined in the consultation document are ambitiously low. Solomon-Williams assured them that this is a message that DECC is getting loud and clear.
One of the proposals was to have regular six monthly degression with the option of a fast track degression if installations were much higher than anticipated in any period. "Feedback on the fast track degression was pretty negative," said Solomon-Williams. "A fixed time is more important than a a fixed amount."
As a result, DECC is looking at the possibility of having three levels for each degression point, dependent on deployment a month or two before. It also is looking at more frequent degression points, and will "definitely improve the way it does data publication".
Asked if FIT tariff rates would rise if costs of installation rose, Solomon-Williams said "I don't think it will work if we increase levels, but we may be able to offer no degression, and people will have to wait for prices to come down again." However, she added that skipping a degression is "a difficult one for ministers".
Solomon-Williams also fed back on responses to other parts of the 2A consultation as follows:
- People are OK about reducing the length of the solar PV feed-in tariff from 25 to 20 years
- Respondents like that the tariff is index-linked and want to keep that
- Indications are that the export tariff should be higher, which is won't affect the generation tariff as it is funded differently, so this is a win-win.
If you have a question about anything in the above blog, please ask it in the comments section below.
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