Government announces improvements to Feed-in Tariffs scheme

Published:  09 February, 2012

LONDON: The Government has announced plans to ensure the future of the Feed-in Tariffs scheme to make it more predictable.

Transparency, longevity and certainty are at the heart of the new improved scheme. The reforms will provide greater confidence to consumers and industry investing in exciting renewable technologies such as solar power, anaerobic digestion, micro-CHP, wind and hydro power.

The Feed-in Tariffs (FITs) scheme provides a subsidy, paid for by all consumers through their energy bills, enabling small scale renewable and low carbon technologies to compete against higher carbon forms of electricity generation.

The surge of solar PV installations in the latter part of last year, due to a 45% reduction in estimated installation costs since 2009, has placed a huge strain on the FITs budget.

Climate Change Minister Greg Barker said: “Today we are announcing plans to improve the Feed-in Tariffs scheme. Instead of a scheme for the few the new improved scheme will deliver for the many. Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry. We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.

“I want to see a bright and vibrant future for small scale renewables in the UK and allow each of the technologies to reach their potential where they can get to a point where they can stand on their own two feet without the need for subsidy sooner rather than later.”

A tariff of 21p/kWh will take effect from 1 April this year for domestic-size solar panels with an eligibility date on or after 3 March 2012. Other tariff reductions apply for larger installations.

Properties installing solar panels on or after 1 April this year will be required to produce an Energy Performance Certificate rating of ‘D’ or above to qualify for a full FIT. The previous proposals for a ‘C’ rating or a commitment for all Green Deal measures to be installed was seen as impractical at this stage.

We estimate that about half of all properties are already eligible for a ‘D’ rating. From 1 April 2012, new ‘multi-installation’ tariff rates set at 80% of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. This reflects the lower costs of such installations, as they benefit from the economies of scale. Based on the feedback received, the threshold is set at more than 25 installations.

Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate. DECC is now consulting on a proposal that social housing, community projects and distributed energy schemes be exempt from these multi-installation tariff rates. The tariff for micro-CHP installations will be increased to recognise the benefits this technology could bring and to encourage its development.

In line with the evidence of falling costs for solar PV, DECC is proposing to peg the subsidy levels to cost reductions and industry growth to provide more certainty for future investments. This will ensure that subsidy levels keep in step with the market. It builds on the best of the existing German system and will remove the need for emergency reviews.

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