Business interest in solar falls after cuts

21st January 2016


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  • Mitigation ,
  • Renewable ,
  • Management/saving

Author

Marlene Vella

Businesses are dropping plans to install solar photovoltaic (PV) panels on the roofs of offices and factories after the government confirmed cuts to renewable energy subsidies on small-scale schemes.

In December, the energy and climate change department (Decc) published new rates for feed-in-tariffs (FITs) for small-scale PV, wind and hydro installations. Although the cuts were not as severe as originally proposed in the August 2015 consultation, the solar industry said the changes would challenge the viability of commercial rooftop schemes.

From 8 February, projects with a capacity of 10-50kW will receive 4.59p/kWh instead of the current rate of 10.9p/kWh. Those over 1MW will receive 0.87p/kWh, down from 5.94/kWh. The rates target a return on investment of 4.8%, Decc said.

The department is also introducing a quarterly cap on the capacity of new solar projects installed from 8 February. The cap will limit annual government spending on FITs to £100 million. Those who miss out will have their FITs applications frozen until the next cap opens, Decc said. However, pre-accreditation, which allows applicants to pre-book their FIT rate, will be reintroduced from 8 February after Decc recognised that removing it created too much uncertainty for businesses, which may need a few months to make investment decisions.

Renewable energy advisers said that the changes were already having an impact on business interest in solar projects. Chris Jennings, strategic development manager at energy and carbon consultancy Sustain, said: “We have observed a distinct drop in demand for our solar PV modelling services since the cuts were announced – particularly in our stockwide PV capacity studies.”

One of the consultancy’s largest clients had shelved all plans for solar PV as a result of the cuts, he added. Payback times for housing association schemes had increased from 11 to 17 years, the firm estimated.

Phil Horton, managing director at renewable energy firm Dulas, agreed the changes would increase the payback times for solar projects, so firms would now need regard any subsidies they receive as bonuses. “We’re still quoting for large, blue-chip clients as their drivers, such as meeting their own CO2 reduction targets, tend to differ from those of smaller firms,” Horton said. Solar projects were also important for businesses that wanted to guarantee their future price of energy.

The annual cap in particular has caused great uncertainty, said James Robinson, an energy specialist at consultancy Carter Jonas. No-one will go ahead with new projects until they see how the cap works in practice, he warned. “The fear is that the caps will be met immediately. If there’s a big rush in applications then you’ll be on the waiting list,” he said. Commentators agree that solar schemes might still be viable for energy intensive industries.

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