Government confirms deep solar incentive cuts
DECC approves proposed cuts to solar feed-in tariffs, slashing support for large projects by up to 70 per cent
The Department of Energy and Climate Change (DECC) has today dashed hopes that it would reconsider proposed cuts to feed-in tariff (FIT) incentives for large solar installations, confirming that the new incentive regime will come into effect as planned from 1 August.
The solar industry has been lobbying the government to scale back its proposed cuts, arguing that reductions in feed-in tariffs of between 40 and 70 per cent will make virtually all solar installations with over 50kW capacity unviable.
But responding to its fast-track consultation, today DECC confirmed it would stick with the changes proposed in the original consultation document, imposing deep cuts in incentives to solar installations with over 50kW capacity and also delivering increases in the level of support available for anaerobic digestion technologies.
As a result, from the start of August, feed-in tariffs for solar installations with between 50kW and 150kW of capacity will fall 42 per cent to 19p/kWh, mid-size installations with between 150kW and 250kW capacity will see incentives cut 51 per cent to 15p/kWh, and installations with between 250kW and 5MW of capacity will see feed-in tariffs slashed 72 per cent to 8.5p/kWh.
Climate minister Greg Barker reiterated his view that the cuts were necessary to ensure the feed-in tariff scheme retains sufficient funds to support the rollout of domestic solar installations.
“I want to drive an ambitious rollout of new green energy technologies in homes, communities and small businesses, and the FIT scheme has a vital part to play in building a more decentralised energy economy,” he said in a statement.
“We have carefully considered the evidence that has been presented as part of the consultation and this has reinforced my conviction of the need to make changes as a matter of urgency. Without action the scheme would be overwhelmed. The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities, and will also further encourage the uptake of green electricity from anaerobic digestion.”
DECC said that every 5MW solar farm would incur a cost of approximately £1.3m per year, meaning that 20 large solar farms could incur an annual cost of up to £26m – enough money to support PV installations for more than 25,000 households.
However, the solar industry expressed bitter disappointment at the move, arguing it meant that all large solar installations planned for the second half of this year would now be shelved, resulting in lost investment and jobs, and undermining efforts to build the economies of scale that will reduce the cost of solar power.
The consultation exercise received 516 responses in total, including 442 responses to the question on whether the proposed tariffs were appropriate – 81 per cent disapproved of the new regime.
But the government said there was no consensus among respondents on what would be an appropriate new tariff level and insisted there was substantial evidence that large numbers of new solar farms would undermine the financial viability of the feed-in tariff scheme by eating into the available funds. It also said the current tariff levels were providing investors with rates of return far in excess of the five to eight per cent the feed-in tariff scheme is meant to deliver.
However, figures from the industry have demonstrated that under the new tariffs installations with over 50kW capacity will enjoy minimal rates of return well below the stated five per cent level.
Dave Sowden of the Micropower Council said the industry was particularly disappointed by the failure to reconsider cuts to mid-size rooftop installations.
“We are disappointed at the fact they did not look again at building-integrated installations,” he said. “That means a lot of meretricious projects, particularly on schools, will no longer go ahead.”
However, he argued it was time for the industry to draw a line under the saga and work with the government to ensure effective incentives are agreed as a result of DECC’s promised full review of feed-in tariffs next year.
Others were less sanguine about the confirmed cuts, warning that the UK’s emerging solar farm industry was now on the brink of collapse.
Howard Johns, chairman of the Solar Trade Association, said the onus was on the government to develop an alternative strategy for large solar installations. “Solar is now in a mess,” he said. “Many investors and project developers are walking away badly burned, and current renewables obligation support for solar is too low to prevent collapse. We want to meet with ministers to find a way forward as a matter of urgency.”
His comments were echoed by Gaynor Hartnell, chief executive of the Renewable Energy Association, who argued that the government should have instead imposed more modest cuts to feed-in tariffs for all installations in line with falling solar panel costs.
“The logical approach would have been a 25 per cent reduction across the board, irrespective of size,” she said. “This is on account of panel costs falling significantly, a phenomenon expected to continue so that PV should need no subsidy before the end of the decade. We think government should increase the size of the feed-in tariff budget and encourage a healthy PV industry to establish in the UK.”
The government is currently facing legal action from a number of solar developers over its handling of the consultation and its failure to provide sufficient warning about cuts to feed-in tariffs. The judge has ruled that the case can proceed and it remains to be seen if a final judicial ruling will impact the imminent changes to tariffs.
A DECC spokeswoman said the department would continue to fight the case.
There was better news for the anaerobic digestion sector as the government confirmed tariffs would rise to 14p/kWh for installations with up to 250kW of capacity and 13p/kwH for installations with between 250kW and 500kW of capacity.
“At a time when other technologies are being cut back, these modest increases are welcome,” said Hartnell. “On-farm AD brings a wide range of environmental and waste management benefits, and we are glad to see these being recognised.
“We look to the forthcoming anaerobic digestion strategy and the Renewable Heat Incentive to complete the picture so the sector can take off in the coming 12 months.”
The Department of Energy and Climate Change (DECC) has today dashed hopes that it would reconsider proposed cuts to feed-in tariff (FIT) incentives for large solar installations, confirming that the new incentive regime will come into effect as planned from 1 August.
The solar industry has been lobbying the government to scale back its proposed cuts, arguing that reductions in feed-in tariffs of between 40 and 70 per cent will make virtually all solar installations with over 50kW capacity unviable.
But responding to its fast-track consultation, today DECC confirmed it would stick with the changes proposed in the original consultation document, imposing deep cuts in incentives to solar installations with over 50kW capacity and also delivering increases in the level of support available for anaerobic digestion technologies.
As a result, from the start of August, feed-in tariffs for solar installations with between 50kW and 150kW of capacity will fall 42 per cent to 19p/kWh, mid-size installations with between 150kW and 250kW capacity will see incentives cut 51 per cent to 15p/kWh, and installations with between 250kW and 5MW of capacity will see feed-in tariffs slashed 72 per cent to 8.5p/kWh.
Climate minister Greg Barker reiterated his view that the cuts were necessary to ensure the feed-in tariff scheme retains sufficient funds to support the rollout of domestic solar installations.
“I want to drive an ambitious rollout of new green energy technologies in homes, communities and small businesses, and the FIT scheme has a vital part to play in building a more decentralised energy economy,” he said in a statement.
“We have carefully considered the evidence that has been presented as part of the consultation and this has reinforced my conviction of the need to make changes as a matter of urgency. Without action the scheme would be overwhelmed. The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities, and will also further encourage the uptake of green electricity from anaerobic digestion.”
DECC said that every 5MW solar farm would incur a cost of approximately £1.3m per year, meaning that 20 large solar farms could incur an annual cost of up to £26m – enough money to support PV installations for more than 25,000 households.
However, the solar industry expressed bitter disappointment at the move, arguing it meant that all large solar installations planned for the second half of this year would now be shelved, resulting in lost investment and jobs, and undermining efforts to build the economies of scale that will reduce the cost of solar power.
The consultation exercise received 516 responses in total, including 442 responses to the question on whether the proposed tariffs were appropriate – 81 per cent disapproved of the new regime.
But the government said there was no consensus among respondents on what would be an appropriate new tariff level and insisted there was substantial evidence that large numbers of new solar farms would undermine the financial viability of the feed-in tariff scheme by eating into the available funds. It also said the current tariff levels were providing investors with rates of return far in excess of the five to eight per cent the feed-in tariff scheme is meant to deliver.
However, figures from the industry have demonstrated that under the new tariffs installations with over 50kW capacity will enjoy minimal rates of return well below the stated five per cent level.
Dave Sowden of the Micropower Council said the industry was particularly disappointed by the failure to reconsider cuts to mid-size rooftop installations.
“We are disappointed at the fact they did not look again at building-integrated installations,” he said. “That means a lot of meretricious projects, particularly on schools, will no longer go ahead.”
However, he argued it was time for the industry to draw a line under the saga and work with the government to ensure effective incentives are agreed as a result of DECC’s promised full review of feed-in tariffs next year.
Others were less sanguine about the confirmed cuts, warning that the UK’s emerging solar farm industry was now on the brink of collapse.
Howard Johns, chairman of the Solar Trade Association, said the onus was on the government to develop an alternative strategy for large solar installations. “Solar is now in a mess,” he said. “Many investors and project developers are walking away badly burned, and current renewables obligation support for solar is too low to prevent collapse. We want to meet with ministers to find a way forward as a matter of urgency.”
His comments were echoed by Gaynor Hartnell, chief executive of the Renewable Energy Association, who argued that the government should have instead imposed more modest cuts to feed-in tariffs for all installations in line with falling solar panel costs.
“The logical approach would have been a 25 per cent reduction across the board, irrespective of size,” she said. “This is on account of panel costs falling significantly, a phenomenon expected to continue so that PV should need no subsidy before the end of the decade. We think government should increase the size of the feed-in tariff budget and encourage a healthy PV industry to establish in the UK.”
The government is currently facing legal action from a number of solar developers over its handling of the consultation and its failure to provide sufficient warning about cuts to feed-in tariffs. The judge has ruled that the case can proceed and it remains to be seen if a final judicial ruling will impact the imminent changes to tariffs.
A DECC spokeswoman said the department would continue to fight the case.
There was better news for the anaerobic digestion sector as the government confirmed tariffs would rise to 14p/kWh for installations with up to 250kW of capacity and 13p/kwH for installations with between 250kW and 500kW of capacity.
“At a time when other technologies are being cut back, these modest increases are welcome,” said Hartnell. “On-farm AD brings a wide range of environmental and waste management benefits, and we are glad to see these being recognised.
“We look to the forthcoming anaerobic digestion strategy and the Renewable Heat Incentive to complete the picture so the sector can take off in the coming 12 months.”
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