The Department of Energy and Climate Change (DECC) has dropped controversial plans to link eligibility for the Feed-in Tariff (FiT) for solar electricity with a requirement for properties to have Green Deal measures in place, but has today set out proposals that could see further deep cuts to the subsidy scheme.
Unveiling a range of "improvements" to the scheme, today, DECC
climbed down from a previous proposal that any property benefiting from the solar FiT
should have Green Deal
measures in place first, or an Energy Performance Certificate
(EPC) rating of 'C’. Instead, however, properties will have to carry a minimum EPC rating of 'D’ for any solar installation looking to benefit from the FiT subsidy for solar from this April.
At the same time, though, DECC set out new proposals for the FiT scheme that could see incentives cut for domestic-scale solar PV installations to 13.5 pence per kilowatt hour (p/kWh) by July – more than two thirds less than what they are now. The move is being described by some in the solar industry as a "disaster".
And while the solar industry awaits the outcome of DECC’s final appeal bid to the Supreme Court on its plans to slash the solar FiT by half from December 12 2011, Ministers confirmed today that whatever the outcome of the judicial review, the reduced tariff of 21 p/kWh will take effect from April 1 this year, with an eligibility date on or after March 3 2012.
DECC said it couldn’t give certainty on tariff levels for solar installations with an eligibility date between December 12 2011 and March 3 2012 due to its ongoing legal battle. It confirmed, it had until February 21 to lodge its case with the Supreme Court.
FiT: pegged to solar technology costs
In another important change to the FiT, aimed at getting rid of the uncertainty that has dogged the scheme due to policy changes, DECC said it will in future peg the FiT rates for solar to the cost reductions of the technology and industry growth – a system already employed in Germany. This it said would remove the need for "emergency reviews". The cost of solar PV has fallen by more than 30 per cent since the FiT was introduced in the UK in April 2010 – the main reason the Government says behind a huge surge in the take up of the FiT scheme for solar as households and businesses have seen return on investments soar.
DECC said the changes would ensure the future of the FiT scheme was "more predictable", certain and transparent and would mean it benefited more people and a greater number of renewable
"Instead of a scheme for the few the new improved scheme will deliver for the many," Climate Change Minister Greg Barker said. "Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry.
"We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long-term, predictable rate of return that will closely track changes in prices and deployment."
But DECC admitted that its improvements will not avoid busting the FiT budget, although it said it aimed to bring the costs of the scheme back within the budget over the next three years. Securing the £460 million FiT budget was the reason DECC sought to introduce the sweeping cuts to the solar FiT back in October and it why it says it is taking its legal fight to highest court in the land – despite four Judges thinking otherwise.
"Ongoing overspend will not be acceptable within the terms of the framework, particularly as it is funded from consumer bills," a DECC spokesperson said.
DECC said it would be using "budget flexibility" to cover the overspend in the short term, reallocating money primarily from an underspend on the budget allocated for large-scale renewables.
It promised household would not pay for it through higher energy bills. The FiT is paid for through a levy imposed on the energy suppliers, which is then passed on to customers via their electricity bills.
Green Deal requirement
DECC said it had "listened carefully" to feedback it had received in its the consultation launched on October 31, which led to its decision to drop the Green Deal requirement, a measure that many in the solar industry had warned would be unworkable and would kill off the sector. The Green Deal, which is set to launch in October, will enable householders and businesses to make energy efficiency improvements to the homes and workplaces at no upfront cost.
Instead, DECC said properties installing solar panels on or after April 1 this year will be required to produce an EPC rating of 'D’ or above to qualify for a full FiT. It said it estimated that about half of all properties are already eligible for a 'D’ rating, thereby suggesting this was a more workable alternative to imposing the 'C’ rating. A spokesperson said the changes would affect non-domestic properties as well, as well domestic.
DECC also said that from April 1, new 'multi-installation’ tariff rates set at 80 per cent of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. Based on the feedback received from its consultation, it said the threshold had been set at more than 25 installations. Social housing, community projects and distributed energy schemes could be exempt from the new rules, which DECC is about to consult on.
Further cuts to solar FiT
As part of its comprehensive review of the FiT for solar PV, DECC set out proposals that could see the subsidy for small-scale solar PV cut to 16.5p/kWh from July 1 if deployment of solar PV reaches 150 megawatts (MW) between March 3 and April this year, or by as much as 13.6p/kWh if it reaches 200 MW.
Larger installation would face even deeper cuts, while by the autumn further cuts still could be imposed.
Reacting to the proposals, Howard Johns, chairman of the Solar Trade Association said: "It’s another smashing of the tariffs for an industry that is already shaky.
"It knocks off half of the housing in the UK [that could have solar]. But the key thing is it will mean a massive drop in the size of the industry. Ministers are saying they will create jobs – maybe in three or four years’ time –but right now we are facing redundancies."
But Barker said he wanted to see "a bright and vibrant future for small scale renewables in the UK and allow each of the technologies to reach their potential where they can get to a point where they can stand on their own two feet without the need for subsidy sooner rather than later."
In a boost for micro-combined heat and power, DECC said today it would be increasing the FiT for such installations. It also said there was potential for tariff guarantees for wind, anaerobic digestion and hydro projects.
The consultation on DECC’s comprehensive review of the FiT closes on April 26.
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