Government announce further cuts to feed-in-tariff
After months of harsh reductions, court appeals and severe uncertainty within the Solar PV industry, the Department of Energy & Climate Change (DECC) reveal future proposals for the Solar PV feed-in-tariff. The comprehensive written statement outlines how the government plan to reduce the feed-in-tariff payments at a steady rate going forward, in an attempt to offer a more ‘predictable’ scheme.
Feed-in-tariffs were introduced in April 2010 as a way of offering financial incentives to individuals and businesses generating their own electricity using Solar PV systems. The scheme proved very effective, with the number of both domestic and commercial installations increasingly dramatically throughout 2010 and 2011. On 31st October 2011 the government announced plans to reduce the feed-in-tariff from 1st April 2012 by approximately 50%. In addition to this, an earlier cut-off date of 12th December 2011 was also proposed.
After months of legal battles and industry professionals unsure of what messages to send out to customers, DECC have released a full written statement of their plans for the feed-in-tariff going forward. Whilst the details of the proposal have not been met with approval by many, there is at least some clarity as to what the industry faces throughout the next few years.
The main element of the proposal is to run a degression scheme, where tariffs are reduced in reference to the installed capacity reached within the UK. The proposal drops on average 10% every 6 months, which on the surface does appear fairer than a 50% drop. What is a crucial point however, is that this degression scheme will occur on top of the 50% cuts already imposed, which could mean a drop of around 70% within the space of 12 months, a decrease which is much larger than the manufacturer cost reductions which the government based part of their initial proposal on.
Solar PV systems installed between 1st April 2012 and 1st July 2012 will attract the current tariff (see below). There are then three options to the degression scheme which are based on the installed capacity reached throughout March and April. The three options are as below:
Option A will apply if installed capacity exceeds 200MW
Option B will apply if installed capacity is between 150MW and 200MW
Option C will apply if installed capacity does not reach 150MW
Full details of the proposed new tariff rates are as below:
There were also some new proposed additions to the tariff scheme in the form of energy performance requirements and multi-installation tariff rates. Multi-installation tariff rates will enable up to 25 PV installations before a lower tariff is introduced, this will be particularly beneficial to small businesses, councils and community groups.
Dwellings which do not meet certain energy efficiency requirements is also something which the solar industry was concerned about. Originally it was rumoured that buildings which did not meet an EPC rating of C would receive a lower tariff, however the new proposal has now brought this down to EPC rating D. This is good news as it now means that around 50% of existing buildings will automatically be eligible for the standard tariff. Buildings which do not meet this requirement may be imposed the stand alone tariff (***). Greg Barker, Minister of State for Energy and Climate Change announced in the House of Commons that the introduction of the Green Deal later in 2012 would help individuals and businesses to reach the required energy efficiency rating through various other methods – something which we will look at in more detail at a later date.
In addition to the above proposals, there is also the on-going appeal for the old tariff rates to be reinstated for installs up to 3rd March 2012. Energi are working on the existing tariff rates and advising customers to base their decisions on a payment of 21p for systems up to 4kWp and 15.2p for systems between 10kWp and 50kWp, and so on. If the appeal is lost, then there is a chance that the higher rates (43.3p for up to 4kWp, 32.9p for 10-50kWp) could be reinstated, however the decision could take up to 12 months and there are no guarantees.
If you have a question regarding the feed-in-tariff then please visit our news pages for regular updates, or contact us on Freephone 0800 533 5130.
