Solar FiT cuts will “significantly delay” grid parity, report warns
Green policy news – by GreenWise staff
24th January 2012
Government plans to cut Feed-in Tariffs (FiT) for solar electricity systems will delay grid parity and extend the need for subsidies by several years, a report has warned.
The study by
Cambridge Modelling, a computation modelling and consultancy firm, examined the impact of Governmental plans to reduce the
FiT subsidy for
solar photovoltaic (PV)
installations in the UK. It found that at the current level, the FiT for PV installations four kilowatt (kW) in size would ensure that small-scale solar would reach grid parity by 2019. Grid parity is when the cost of alternative forms of producing electricity has reached equality with retail electricity prices.
Currently, solar PV systems up to 4 kW in size receive a FiT of 43 pence per kilowatt hour. But the Department of Energy and Climate Change (DECC) plans to cut the tariff to 21 pence. The Cambridge Modelling study found that the proposed reductions will delay grid parity for small solar installations and in turn extend the need for a FiT subsidy by approximately three years.
"The proposed changes to the Feed-in Tariff scheme will significantly delay the development of UK solar photovoltaic industry efficiencies," said Dr Mark Hughes, director at Cambridge Modelling.
Legal battle
DECC, which has been embroiled in a legal wrangle over the proposed solar subsidy cuts, says they are necessary to protect the FiT budget and to ensure households are protected from rising energy bills. It has estimated that doing nothing could add £80 to energy bills by 2020.
But the report by Cambridge Modelling suggests that cuts to the FiT will also have a negative impact on household energy bills because the subsidy would need to be extended. The FiT is paid for through household energy bills.
The report also identified important omissions from the DECC consultation on the FiT changes, which close last month.
"Large savings for electricity consumers from the development of UK solar photovoltaic industry efficiencies under the existing tariff schedule have been overlooked. In 2020 alone, these missed savings could exceed £57 million," Dr Hughes said.
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