FITs scheme under threat of closure

28th August 2015


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  • Renewable ,
  • Generation

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IEMA

Financial support for small-scale renewables could end completely in January, despite being judged a success by the government's own report.

Publishing its promised review of the feed in tariff (FIT) scheme yesterday, the energy and climate department (Decc) said that the future of the FIT would be determined by affordability. It wants to cut expenditure under the scheme to between £75million and £100 million by 2018/19.

“If following the consultation we consider that the scheme is unaffordable, we propose ending generation tariffs for new applicants from January 2016 or, alternatively, further reducing the size of the scheme’s remaining budget available for the cap,” the consultation states.

Closure could be immediate or phased in over several years, it adds. The main proposal is to cut tariff rates for domestic solar PV installations of up to 10kW from 12.9p to 1.63p/kWh in January.

The rate for commercial rooftops, which accounts for only 5% of solar being deployed under the FIT, would be cut from 3.69p/kWh to 2.28p/kWh, Decc suggests.

Suggested changes to FiT tariff:

New Tariff bands Current rate (Oct-Dec 2015) p/kWh New proposed rate from Jan 2016 p/kWh
0-10kW 11.30-12.47 1.63
10-50kW 11.30 3.69
50-250kW 9.21-9.63 2.64
250kW-1MW 5.94 2.28
1MW-5MW 5.94 1.03
Standalone 4.28 1.03

The consultation also proposes a 42MW cap on deployment each quarter, which would trigger a further 10% degression in tariff rates if breached. Over the past 12 months, 620MW has been installed, according to trade body the Solar Trade Association (STA).

Other proposals in the consultation include:

  • the requirement for smart meters for each installation, instead of the current system of “deemed export”, which assumes that 50% of the power generated by the system is exported;
  • requiring buildings to achieve an energy performance certificate (EPC) rating of C rather than D before solar PV is installed. Schools and community groups would be exempt;
  • future export tariffs would be linked to the consumer price index rather than the retail price index; and
  • existing schemes would not be allowed to apply for the FIT for capacity extensions.

The changes come despite the fact the scheme has met its top three aims, according to an independent report accompanying the consultation. Dr Colin Nolden from the science policy research unit at the University of Sussex found that cumulative FIT capacity has reached 0.84% of final electricity consumption, compared with a target of 1.6% by 2020. A total of 3.57GW renewable energy capacity has been installed under the FIT in the five years since the scheme began in 2010, representing around 13.5% of the UK’s total installed renewable capacity of 26.4GW.

The cost per tonne of CO2 saved had improved over the course of the scheme, from an average of £650/tCO2 in 2011 to £378.29/tCO2 in 2013, the report said. The scheme was also on track to achieve its target of saving 7 million tonnes of CO2 by 2020, having achieved around 1.3 million tCO2 by 2013.

However, the impact on household bills from the FIT was higher than expected, at £9 a year in 2014 compared with Decc’s project of £6.50 for 2015, the review found.

The study estimated that most of the 15,620 UK jobs in solar PV are dependent on the FIT, while 3,304 people worked in the small and medium wind sector. Anaerobic digestion employed 2,640 people, as well as supporting jobs on farms.

The value of the FIT to the UK economy should not be underestimated, the review said, and pointed out that renewable energy is more labour intensive than fossil-fuel generation. “This labour intensity has particularly favourable job market effects in times of economic recovery,” the report concluded.

Decc has not considered the cost of any job losses that might occur from its latest proposals. “There are likely to be some negative impacts on employment across the renewables sector as a result of these changes; this is not quantified and any evidence is welcome as part of this review,” the impact assessment states.

Solar trade body the STA described the proposals as “damaging and unjustified” and called for the government to mitigate the industry’s “shattered” confidence.

“Decc and the Treasury will need to develop alternative policy proposals to drive commercial sector deployment. The upcoming energy efficiency tax review provides exactly the opportunity to do so,” said Mike Landy, head of policy at the STA.

However, Richard Warren, senior climate and environment policy adviser at the manufacturing body, EEF, said the government had to prioritise reducing emissions at the least cost to consumers, which he said the FIT scheme is “palpably incapable” of doing.

“Even with significant cost reductions achieved in recent years, the FITs scheme reduced carbon at a woefully inadequate rate of £380/tonne last year, almost double even that of offshore wind at around £200/tonne. A review is long overdue,” he said.

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