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Solar PV subsidy FIT cut to maybe 21p (from 43.3p) per kWh proposed by UK Government.

Filed under: Latest News

UK PV FIT CUTS ANNOUNCED 31 October 2011.

solar panels subsidy / support breaking news:

Solar FIT CUTS NEWS Update Friday 4 November 2011.

Here is the latest STA position on the FIT cuts, points with which we fully agree.

 

  • The 12th December FIt cuts implementation date is unfair – and must be delayed
  • UK’s solar PV sector has achieved exceptional costs reductions
  • Solar is the second biggest renewables resource in the UK & it now needs to be taken seriously
  • 25-30,000 people are employed in the UK solar PV sector
  • The FIT budget risks running out well before the end of this Parliament, even if industry adapts to the new solar PV FIT rate
  • Solar PV can be subsidy free after a few more years of structured support, transforming choice & competition in the electricity sector
  • FITs will add under £1 to people’s energy bills this year, according to Ofgem

 

And here is another solar PV FIT cuts update Monday 31 October 2011. Three articles, with our highlights in bold, and our comments in square brackets.

But, first, our general comment.

We all know that today’s PV FIT subsidy is obscenely high and a waste of taxpayers’ money, so apart from saying the obvious which is “buy solar PV right now” and “use it or lose it“, our top response is not to join in the shouts of “blue murder”, because this will only bring the solar industry into further disrepute (this time for being greedy, rather than seedy) but, instead, to:

1/ Seek proper balance in the renewable energy market, perhaps as a written commitment from DECC for the same target Return on Investment (RoI) for solar thermal as for PV. Right now the market is appallingly unbalanced with around 8% RoI available for solar PV and under 4% for solar water heating system installations.

2/ Ask for 25p for the 4kWp PV FIT, not 21p. This is similar to the domestic PV FIT level available in Germany.

3/ Ask for much longer timing for implementation such as 1 February as a start date. Right now there are only 40 days left to install and that number also assumes that installers work weekends and that bad weather does not stop them. The real working figure is probably about 30 installable days. We are working with all of our installers to maximise their productivity and with our suppliers to ensure immediate stocks.

4/ Ask for an agreement to implement the cuts in three equal steps, three months apart. This will allow govt to backtrack, say at the last step, if it chooses, if it finds the cuts are, in fact too deep and the intended spending trajectory will not be met. We hope this can be taken on board, but the chances are slim because this is a “fast track” review.

5/ Ask for reasonable “minimum home energy criteria valid exemptions” (ie exempt from “EPC level C” perhaps or a downgrade to D) for older and hard to heat buildings based on the logic that green electricity is green electricity wherever it is generated. Older buildings still need renewables even if they are intrinsically energy-inefficient!

Already several members of the UK solar industry have set up a fighting fund. We have offered to contribute, provided that the Solar Trade Association stop boycotting us. Here is a video of how ugly this can get, from last Friday’s AGM.

It is well worth reading the main PV FIT consultation document which is here.

Second, here is the main press statement.

Barker: Boom and bust for solar must be avoided

Press notice: 11/091
31 October 2011


  • New tariffs proposed [as expected]
  • Energy efficiency requirement from April 2012 [good idea but may be impractical in old homes]

Urgent action is needed to put the solar industry on a steadier, clearer and sustainable growth path, avoid boom and bust and protect the wider Feed-in Tariff scheme (FITs), Greg Barker said today.

Reduced subsidies for domestic solar electricity production have been proposed as part of an urgent effort to keep the FITs scheme budget under control and reflect the plummeting costs of the technology.

The proposals, subject to consultation, would introduce a new tariff for schemes up to 4kW in size of 21p/kWh – down from the current 43.3p/kWh. Reduced rates are also proposed for schemes between 4kW and 250kW, to ensure those schemes receive a consistent rate of return. [Interesting that a level of 9p was rumoured a week ago. Was this lower level always totally unfounded or was it a cynical example of "expectation management" by Government?]

Climate Change and Energy Minister Greg Barker said:

“My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust.

“The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme.

“Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year.

“Our proposal for an energy efficiency requirement, as well as the launch of the Green Deal next autumn, creates a massive opportunity for these firms to use their expertise to get a foothold in this exciting new market.

“People who are now thinking of installing solar PV need to do so with their eyes wide open and I’d encourage them to call the Energy Saving Trust for the latest advice.” [Careful: EST do not always give independent and impartial advice.]

The cost of an average domestic PV installation has fallen by at least 30% since the start of the scheme – from around £13,000 in April 2010 to £9,000 now. [For our PV prices see here.]

If the Government took no action, by 2014-15 FITs for solar PV would be costing consumers £980 million a year, adding around £26 (2010 prices) to annual domestic electricity bills in 2020. Our proposals will restrict FITs PV costs to between £250-280 million in 2014-15, reducing the impacts of FITs expenditure on PV on domestic electricity bills by around £23 (2010 prices) in 2020.

There is a finite funding allocation for the FITs scheme so as to limit the impact on energy consumers, who pay for the scheme through their bills.

A recent surge in households installing solar PV has threatened to break the budget. There were over 16,000 new solar PV installations in September alone – nearly double the number installed in June. And nearly three times as much solar PV as projected has so far been installed with over 100,000 separate installations with over 400MW of capacity. [A great sign of success, in a way! But the exponential uptake of virtually free money always will be.]

The new proposed tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011. [This is a very tight deadline! Order solar PV right now before the solar industry's installation capability tops out!] Such installations would receive the current tariff before moving to the lower tariffs on 1 April 2012. Consumers who already receive FITs will see their existing payments unchanged, and those with an eligibility date on or before 12 December will receive the current rates for 25 years. [This continuity restatement is reassuring.]

The eligibility date of a project is based on it being commissioned (in working order) and having its request for accreditation received by a FIT licensee (schemes up to 50kW) or Ofgem (more than 50kW).

The proposed new tariffs will offer a rate of return of around 4.5% to 5% index linked and tax free (for domestic installations) for well-situated solar PV – broadly comparable to that intended when the scheme was set up. The tariffs are broadly comparable to those offered in Germany, which has also recently reduced its tariffs.

Today’s consultation also proposes:

  • a new energy efficiency requirement that would mean from 1 April 2012 a property would have to reach a certain level of energy efficiency to receive the proposed new tariff rates. This could include reaching an Energy Performance Certificate level of C or taking up all the measures potentially eligible for Green Deal finance, depending on the outcome of the consultation. As a transitional arrangement, installations with eligibility dates between 1 April 2012 and 31 March 2013 would have 12 months from the eligibility date to comply with the energy efficiency requirement.
  • new multi-installation tariff rates for aggregated solar PV schemes, i.e. where a single individual or organisation owns or receives FITs payments from more than one PV installation, located on different sites. The new tariff rates would apply to all new PV installations that are part of an aggregated PV scheme and have an eligibility date on or after 1 April 2012. The new tariffs are set at 80% of the standard tariffs for individual installations.

The Government will also, as part of its review into the FITs scheme, consider whether more could be done to enable genuine community projects to be able to fully benefit from FITs and whether, for example, a definition of community scheme is required and if so, how this should be defined.


Notes to editors

  1. Comprehensive Review Phase 1: Consultation on Feed-in Tariffs for solar PV
  2. The consultation is the first of two on the comprehensive review of the FITs that were announced at the start of the year (in addition to the fast-track review, which has now been completed). DECC will be publishing a separate consultation around the end of 2011, which will consider other aspects of the scheme including tariffs for other technologies.
  3. Current and proposed generation tariffs for solar PV
Band (kW) Current generation tariff (p/kWh) Proposed generation tariff (p/kWh)
≤4kW (new build) 37.8 21.0
≤4kW (retrofit) 43.3 [This is the commonest tariff.] 21.0 [We propose 25p]
>4-10kW 37.8 16.8
>10-50kW 32.9 15.2
>50-100kW 19 12.9
>100-150kW 19 12.9
>150-250kW 15 12.9
>250kW-5MW 8.5 8.5*
stand alone 8.5 8.5*

*These are the current tariffs, which we are not proposing changing and which, like all other current tariffs, will be adjusted in line with the Retail Price Index from 1 April 2012.

4. Consumers wanting free, independent and local energy saving advice on how the proposals may affect them should contact the Energy Saving Trust [External link] on 0800 512 012.
5. Details of the funding allocation for FITs

Thirdly, Here is the Energy Minister’s parliamentary statement on FIT cuts.

Gregory Barker MP Written Ministerial Statement on Feed-in Tariffs Scheme

Consultation on the comprehensive review of Feed-in Tariffs 31 October 2011

Today I am publishing a consultation paper on proposed changes to Feed-in Tariffs (FITs) for solar photovoltaics (PV).  The consultation will close on 23 December 2011.

Since the FITs scheme started it has been successful in encouraging people up and down the country to get involved in local, clean green energy generation. Over 100,000 homes now generate their own electricity, and this is just the start of a move towards a far more decentralised local energy economy.  An economy in which homes, businesses and communities are empowered to generate their own energy, and in which low carbon innovation helps sustain green jobs at a critical time for our economy.   A sustainable FITs scheme has an essential role in delivering that vision.

However, the green economy does not exist in a vacuum and it is important, particularly in the current climate, that our approach to public subsidy is responsible and results in the widest possible deployment.  To date, solar PV has been by far the most popular technology with consumers.  We know that the costs of an average PV system have fallen by at least 30% since the FITs scheme started (and we are aware of reports that the global costs of PV modules have fallen by as much as 70% since 2008). This is resulting in returns for investors in solar PV that are simply not sustainable and, without action, could result in the spending envelope for the scheme rapidly being breached.

Today’s consultation document therefore focuses on addressing the budgetary problem and proposes reducing the tariffs for solar PV. Full details of the proposals are set out in the consultation document. The headline is that we are proposing that the generation tariff for PV installations with a total installed capacity of 4kW or less will be reduced to 21p/kWh, which our modelling indicates should deliver around a 4.5% rate of return. We are also proposing reductions to the generation tariffs for PV installations above that level and up to 250kW. These changes are vital if we are to ensure a lasting FITs scheme.

We are proposing that the new generation tariffs should apply from 1 April 2012 to all new solar PV installations which become eligible for FITs on or after an earlier ‘reference date’ which we propose should be 12 December 2011. Installations which become eligible for FITs before the reference date will not be affected and will continue to be eligible for the current generation tariffs.

The consultation also seeks views on two other changes to the FITs scheme for solar PV.  Firstly, the introduction from 1 April 2012 of new multi-installation tariff rates for aggregated solar PV schemes.  These are schemes where a single individual or organisation owns or receives FIT payments from  more than one PV installation, located on different sites.

A final but crucial proposal in this package is to strengthen the link between FITs and energy efficiency by introducing a new energy efficiency requirement for FITs for solar PV. The new requirement would apply to all new solar PV installations which become eligible for FITs on or after 1 April 2012 which are attached or wired to provide electricity to a building.  If the building does not meet the energy efficiency requirement the installation would receive a lower FITs rate of 9p/kWh.

This consultation is the first of two on the comprehensive review of FITs that was announced at the start of the year. We will be publishing a separate consultation around the end of 2011 which will consider other aspects of the scheme including the tariffs for other FIT technologies.  It will also consider proposals to make the FITs scheme more intelligent and responsive to change, improving the system that we inherited from the previous administration to remove the need for stop start reviews and provide greater transparency, longevity and certainty to the industry.

Fourth, in full, is today’s Guardian article on solar PV FIT cuts by DECC Energy Minister Greg Barker.

Britain’s solar energy boom is built on unsustainable foundations (Guardian article by Greg Barker)

You can’t miss Britain’s solar energy boom. Solar panels generating electricity adorn tens of thousands of British homes, providing clean green energy. But the uncomfortable truth is that, with overgenerous subsidies failing to keep pace with plummeting costs, this boom has been built on unsustainable foundations. That is why we are proposing timely measures to reform the feed-in tariff (FIT) scheme and ensure this vital green industry has a long-term future.

It’s easy to see why solar is so attractive: it’s simple, accessible, reliable and fits discreetly into homes and communities. It’s a vital component of our decentralised local energy revolution. But however convinced we may be of the long-term potential of solar, we have to face up to the economic reality that every other sector of the economy is challenged by. The green economy does not exist in a bubble.

The huge subsidised returns for people investing in solar photovoltaic panels – funded from everybody’s energy bills – have now broken double figures and cannot continue. The good news is that the costs of the technology have plunged – by at least 30% – since the scheme started in April 2010. A home installation can now cost around £9,000 or less. A similar installation would have set you back an extra £4,000 less than two years ago.

With installed capacity nearly three times that projected by the last government when it launched the scheme 18 months ago, it all means that solar is burning through its budget at an unsustainable rate. The generous pot of £867m secured for the feed-in tariff scheme by the coalition last year will be completely devoured if we don’t act now.

I still believe passionately that feed-in tariffs are essential. But there is a delicate balancing act to perform to avoid the boom and bust already experienced in countries such as Italy, Spain and France, fuelled by over-generous subsidy.

The challenge we face is to use that public investment to obtain the widest possible deployment. I don’t want a tariff that gives bumper returns to a lucky few but a tariff that incentivises sensible deployment, in the right place, on the right buildings in the greatest numbers.

The coalition’s proposals are about making the FIT scheme more intelligent, more nimble and responsive to market development and, crucially, better value for money for our hard-pressed consumers. We’ll also fix one of the biggest failures of the scheme, namely its failure to require basic energy efficiency measures to be put in place before subsidies are claimed to generate renewable electricity. Our proposals will mean only energy efficient buildings will get the full PV subsidy from April next year.

This new requirement will encourage the industry to make the most of their skills and expertise and work much more closely with the rapidly expanding energy efficiency market.

By taking timely and responsible action to protect the long-term future of the FIT budget, rather than putting our head in the sand, we will forge a sustainable future for the UK’s solar industry.

Used wisely the tariff scheme offers the potential for millions of consumers to generate more of their own green electricity and break the grip of the over-dominant energy companies. I want to fix the feed-in tariff scheme, enhance it and put the whole microgeneration industry on a credible path to a bright and exciting future. [It would help if the Minister added PV to the nation's list of strategic fuel supplies. Right now it is noticeably missing.]

Older news and speculation…

Here is the weekend’s FITs cuts chronology.

1/ Here is the initial leak, a pdf document which the EST uploaded and then withdrew, but which the Guardian spotted and published on Friday morning, which refers to 8 December as a cutoff “reference date” and a proposed 21p per kWh tariff instead of today’s 43.3p.

2/ Here is the EST’s withdrawal of this document (Friday afternoon) in which EST nevertheless state that a “fast track review” of PV FITS  is expected to start w/c 31 October.

3/ Here is confirmation that government will “consult” on cuts in a Financial Times article published on October 28, 2011 6:01 pm which says spokeswoman for The Department for Energy and Climate Change  says the reference date will be included in consultation documents published next week, and the Energy Saving Trust website – which on Friday quoted a reference date of December 8 – “contains inaccuracies”. There is now the possibility that a high level PV FITS cutoff date will be later: on 31 December. So much for solar installers’ family lives!

The important thing is to get on to the current generous 43.3p level of PV FITs, because for the next 25 years it will be index linked with inflation.

Commenting as a supplier in the UK solar PV industry, Barry Johnston of Solar Twin Ltd said:
“If, on Monday, government announces “business as usual” for the FITs until next spring, then I will eat my hat – with delight, because it will demonstrate that they will have done a U-turn. Let’s hope that if government cut the FITS, that they will at least increase the subsidy for solar thermal, to make up for it, because, everyone knows that right now the market is very unbalanced, particularly in the environmental context, according to a Bath University study which is referenced on our site, that solar thermal generally has a much shorter embodied carbon payback time than PV.”

“Some people seem to think we are scaremongering by publishing this. While I don’t blame people for thinking so, I do think that the PV FIT subsidies are about to fall off a cliff sooner rather than later. Industry mood today at the Solar Power UK Conference in Birmingham was grim, even ignoring the latest Solar Trade Association’s antics. They got three courteous heavies to throw me out because they did not want to hear my nine “clean up” motions.

Older PV FIT cuts rumour articles now follow from the week before.

1/ Solar PV FIT support to fall. The Financial Times are expecting DECC’s Feed in Tariff to be halved to about 20p soon, down from 43.3p per kWh.

Our response to this is “to be expected”.

Here is a link to the story.

2/ No more solar PV subsidy for energy inefficient buildings, says UK Energy Minister Greg Barker.

3/ Solar thermal support to rise. Energy Minister Greg Barker reassures solar thermal and talkes about PV links to solar thermal, as we have done for over a decade, saying:

“As part of the new effort to drive a whole-house approach, [The green Deal] solar thermal will have an important role to play alongside PV and other innovative technologies. I am keen to see a much greater integration of solar thermal and PV offerings in the marketplace – providing consumers with the best advice and the right technologies for their situation.”

Greg Barker’s full solar subsidy speech is here.

Our response to this is “great news”!


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