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August 1: All Change

Industry has greeted changes to the solar FiT scheme with mixed emotions.
The beginning of August marks the first day of the new feed-in tariff model for solar photovoltaics in the UK. From today, FiT rates will once more be revised downward along with the tariff lifetime as part of a new degression model.

The two largest changes that come into effect this morning will be the dropping of the FiT rates and the reduction in tariff lifetime. The headline FiT figure for <4kWp is being cut down to 16p from 21p; completing a 63 percent drop in subsidy from March this year. The full FiT levels eligible from August 1, 2012 are laid out below:

Band (kW)Standard generation tariff (p/kWh)Multi-installation tariff (p/kWh)Lower tariff (if energy efficiency requirement not met) (p/kWh)
4kW (new build) 16.0 14.4 7.1
4kW (retrofit) 16.0 14.4 7.1
>4-10kW 14.5 13.05 7.1
>10-50kW 13.5 12.15 7.1
>50-100kW 11.5 10.35 7.1
>100-150kW 11.5 10.35 7.1
>150-250kW 11.0 9.9 7.1
>250kW-5MW 7.1 N/A N/A
stand-alone 7.1 N/A N/A

As part of the new tariff structure, tri-monthly degressions of 3.5 percent will take place. However, the degressions can be delayed or brought forward depending on installation levels in the market. The structure is intended to stop a repeat of the FiT fiasco that industry has been engulfed in over the last 18 months.

The FiT lifetime has also been dramatically lowered from 25 years to 20 years, which the Department of Energy and Climate Change (DECC) believes was necessary in order to bring solar back in line with other renewable technologies.

A morsel of comfort for solar installers is that as of today, the export tariff has been revised upwards from 3p/kWh to 4.5p/kWh, in order to better reflect its value. However, solar installers are approaching the changes with serious trepidation. A recent poll showed that over half of Solar Power Portal readers believe that ‘there will be another serious dip in installs and solar installers will be forced out of business.’

Andrew Lee, General Manager of Solar UK at Sharp, on the other hand heralded the changes as a new dawn for the UK solar industry: “We welcome Government’s decision to work towards creating a more stable FiT for the solar industry. The 16p rate still offers opportunities for both investors and homeowners to take advantage of a cost-effective form of renewable energy while bringing much needed certainty and stability to the market. This is a chance for the industry as a whole to turn a corner and work towards driving growth in the UK.

“We will maintain a dialogue with the government to continue moving solar forward and instil confidence in the sector. The UK solar market has been through a turbulent 18 months but, through innovating and adapting, the industry is well placed to grow.

“It is important to realise that the solar industry can still play a pivotal role and be part of the low carbon economy in the UK, and we are pleased that the government recognises this and is working to create a better, more effective tariff system.”

Tomas Freyman, Valuations Director and Renewable Energy Specialist at BDO LLP echoed Lee’s sentiments, saying: “The latest reduction in the solar FiT allows us to think about renewable energy in its wider context. FiTs have delivered more than 1 GW of solar photovoltaic (largely residential) over the last two years, and have shown that there is a market for investments based on energy users becoming energy generators. That is indeed a great testament to the UK energy user.

“Solar photovoltaic, whether its residential or commercial, however, is still unlikely to occupy more than a niche position in the energy sector as a whole even if investors and developers are still able to generate adequate returns. It is no surprise that the tariffs have come down; they are doing so broadly in line with capital costs. The full intention of these subsidies is to get the market started and, in time, they will no longer be needed as levelised costs of renewable energy meet those for fossil fuels.”

Robert Goss, MD Conergy UK, added: “Unlike last year, where big tariff reductions encouraged booms in solar installations, the August 1 reduction has had less impact. Whether this is down to consumers being more cautious, tighter lending from the banks, or because payback times are only being postponed by a year or so, remains to be seen.

“The bigger picture is that in the current market, Government’s 22GW target for solar can not be met with feed-in-tariffs alone. Where daytime power generation offers instant returns, such as on office roofs, factories, in schools and hospitals, the business case is already strong. For large scale projects, the coalition should seek to resolve its differences on ROCs to avoid the boom-and-bust we had with feed-in-tariffs.”

Energy and Climate Change Minister, Greg Barker said: “the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector. We can now look with confidence to a future for solar which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain’s clean energy economy.

“I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing; industry can plan for growth with confidence.

Solar Power Portal
Date: 01/08/2012
Author: Petter Bennett

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