The Department for Energy and Climate Change today confirmed plans to slash the feed-in tariff for photovoltaic (PV) generation available to domestic and small-scale businesses from 43.3 pence per kilowatt-hour (p/kWh) to 21p p/kWh.
A consultation has been launched proposing that new tariffs will apply to all PV installations fitted on or after 12 December 2011, if there are no further changes before the consultation ends on the 23 December 2011.These installations would operate on the current tariffs until switching on the 1 April 2012.
Alongside this change, the government is planning cuts of between 14 per cent and 55.5 per cent for larger installations with between 4kW and 250kW of capacity. Installations with 4-10kW capacity will see a 55 per cent cut, while larger installations (150-250kW) will see a smaller tariff cut from 15p/kWh to 12.9p/kWh.
Solar industry executives and green groups have criticised the consultation as a sham exercise, noting that the tariff change on the 12 December is set before the consultation is due to end on the 23 December.
The changes are almost exactly the same as those suggested in a document mistakenly published last Friday that estimates that someone who installs an average sized 2.9kW solar system costing £11,500 will now have to wait 18 years instead of 10 before being in credit. This will give the owner a rate of return of around 4% rather than the previous rate of 7%. At the time a DECC spokesman stated that the document is a draft which is “neither final nor accurate.”
In a speech on 26 October to the Solar Power UK conference, Climate Change Minister Greg Barker claimed that the government is “walking the walk” on green policies. Referring to the Solar PV feed-in tariff, he said the government had inherited a scheme that “wasn’t fit for purpose”.
He continued: “with over 100,000 installations representing more than 305 MW of installed capacity you don’t have to be a Nobel prize winning economist to realise that solar is burning through the budget at an unsustainable rate.”
Addressing the concerns of PV businesses he stated: “I know that many of your businesses depend on the FITs levels for your success, at least in the short term. But we cannot escape reality: this is a different world to the one in which FITs were launched… I cannot preside over a scheme which allows a solar panel installation in some of the least sunny locations in Britain to generate returns of more than 12%”
Mr Barker argued that “The future of solar PV in the UK needs to be one based not on subsidy but on sound underlying economics”.
Solar industry executives have reacted angrily to the proposed cuts, with some claiming that the tariff reductions would hit community schemes the hardest. Such schemes seek to provide low-income households with cheap green power, often by installing panels for free. Critics of the cut argue that these schemes would be scrapped as it would not be viable for suppliers to provide free solar panels as the rate of return would be too low.
Reacting to the news, Local Energy Chief Executive Andy Johnston stated: “given the fall in the cost of solar panels, and the wider climate of austerity, a drop in the feed-in tariff was inevitable”. Commenting on the impact for Local Authorities, he continued “it will be a disappointment to some councils who were hoping the feed-in tariff would enable them to provide all social housing tenants with cheap means of heating and lighting”. However he urged councils not to abandon the scheme terming the change a “setback” but “not the end of the road”. Andy said that “public sector organisations should plan to use the whole suite of incentives and instruments available to achieve their low carbon aims”.