Solar sector crippled by FIT changes

10th June 2011

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The UK solar industry has been dealt a death blow by the government after its confirmation of dramatic changes to the feed-in tariff (FIT), warn industry experts.

Energy minister Greg Barker yesterday confirmed (9 June 2011) that from 1 August the levels of payment for generating renewable energy from solar photovoltaic (PV) installations larger than 50kWh and all standalone units will be cut by up to 70%.

The UK’s Solar Trade Association (STA) said the move will “effectively kill” the sector for all installations over 50kW in size.

“Crushing solar makes zero economic sense for UK plc because it will lose us major manufacturing opportunities, jobs and global competitiveness and risks locking us in to more expensive energy options in future,” argued Howard Johns, chair of the STA.

The tariffs are to be reduced exactly as DECC proposed in March, despite a strong negative reaction from the majority of stakeholders that contributed to the consultation asking for feedback on the changes.

More than 80% of respondents disagreed with the new bandings and the cuts to the tariffs for solar PV, and all respondents believed that a rate of 8.5p per kWh would make large-scale solar projects untenable.

In its response to the consultation, DECC interprets the feedback as confirmation that many more large, solar-farm type installations were planned than the department had anticipated and the scheme can afford to support.

DECC estimates that each 5MW solar project would cost £1.3 million per year under the original tariffs. With strict limitations now in place over DECC’s spending for the scheme and a 10% reduction in its budget agreed in the Comprehensive Spending Review, the department argues that its only option was to lower the tariffs.

It openly admits the new bandings means that solar PV installations over 250kWh are no longer commercially viable, but states that enabling such projects was not the intention of the scheme.

“We do not consider that support for large scale PV delivers the broader behavioural benefits of domestic and community scale developments,” says the report.

On making the announcement Barker confirmed: “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.”

He went on to argue that the new tariffs will ensure sustained growth for the solar industry while protecting funding for householders, small businesses and communities. However, the acceptance of the proposed tariffs with no changes has been seen as a real blow by the sector.

"The government has got it seriously wrong on solar,” said Johns. “The Treasury has crippled DECC's ability to respond to major developments in solar and DECC itself hasn't got to grips with this technology.

“Solar is now in a mess. Many investors and project developers are walking away badly burned and current Renewables Obligation support for solar is too low to prevent collapse."

The Renewable Energy Association (REA) reacted to the announcement saying that industry had to be prepared for the government to intervene and reduce tariffs when justified, but that the changes being made were the wrong ones.

“A 25% reduction across all the tariffs would have provided a much more logical answer,” argued Gaynor Hartnell, REA’s chief executive.

“The handling of this whole affair has been poor. Larger-scale PV has been demonised, when it is the most cost-effective approach to renewable energy. We think government should increase the size of the feed-in tariff budget and encourage a healthy PV industry to establish in the UK.”

There has also been mixed reactions to the confirmation of slightly higher tariffs for anaerobic digestion plants after a disappointingly low take up under the initial tariffs.

While the REA welcomed the modest increases the head of the National Farmers Union has criticised the government for not acting on its advice to create a new system.

“We left the meetings believing we had made a more convincing case than this, and they would think very hard about the information we had provided," said Dr Jonathan Scurlock, NFU chief advisor for renewable energy . "This is a bad government move."

His reaction was echoed by the Anaerobic Digestion and Biogas Association (ADBA).

"FITs have so far failed to help more than a couple of projects, and this increase is too small to make any significant change to that,” confirmed ADBA chair Lord Redesdale

"The government does not appear to have taken a strategic view of the role that they want anaerobic digestion to play. These levels are insufficient to encourage plants at any scale and fail to move us closer to the 'huge increase' in energy from waste through anaerobic digestion which the coalition promised."

The full details of the new FIT tariffs and the governments’ response to the consultation can be found on DECC’s website.

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