DECC plans new Feed-in Tariff cuts
The Department of Energy and Climate Change (DECC) has today (28 August) launched a consultation proposing measures to control costs under the Feed-in Tariff (FiT).
Introduced in 2010, the FiT scheme encourages the installation of low-carbon, renewable energy generation facilities by paying for every kilowatt hour it generates, with the rate depending on the type and size of the system.
Two major changes are set out in the consultation, including introducing hugely reduced new generation tariffs, and implementing a cap on new FiTs expenditure of between £75-100 million by 2018/19.
Other changes including a minimum energy efficiency criteria, limiting the FiT to existing technologies, removing the generation tariff for new installations and deployment caps leading to the phased closure of the scheme in 2018/19, are proposed in the consultation.
Proposals responding to exceeded expectations and falling costs, says DECC
According to the consultation document FiT has exceeded all renewable energy deployment expectations, already passing or coming close to passing projections from the 2012 Comprehensive Review for 2020/21 for wind, hydro and anaerobic digestion, with projections for the solar PV (photovoltaic) also making good progress.
However, the consultation document states: ‘This deployment success has also come with costs exceeding our projections. We expect to breach the limits of the Levy Control Framework (LCF), the amount of money agreed within Government which can be added to consumer bills to pay for low-carbon electricity generation.’
A DECC study carried out by consultants Parsons Brinckerhoff suggests that well-sited installations have experienced a fall in the cost of technology deployment, leading to the reduced tariffs suggested in the consultation.
The consultation will run until 23 October.
Renewables industry says changes would ‘savage’ the sector
Members of the renewables industry have been quick to respond to the proposals. The Renewable Energy Association, which represents the industry, says that the ‘swingeing’ tariff cuts will create ‘the biggest boom and bust for the industry and decrease value for money for the consumer’.
In particular, it said, the cuts of 87 per cent to domestic solar generation, and 82 per cent for solar on commercial rooftops would ‘savage the industry and gut demand for the technology’.
Head of Policy and External Affairs, James Court said: “Rooftop solar has to been seen as one of the key technologies for a decarbonised future, with consumers and businesses also gaining control over the centralised energy market, this is a phenomenally damaging and short sighted decision which sets back this goal significantly and will lead to higher costs in the medium to long term.
“87 per cent is beyond the worst fears of many of our members, it is hard to see how homeowners or businesses could see solar as an attractive option for the foreseeable future following these disproportionate cuts.”
Changing ‘transformative’ FiT could put brakes on innovation
Good Energy is an administrator of the FiT and processes payments for the electricity produced by nearly 100,000 homes and businesses across the UK.
Responding to the DECC’s proposals Juliet Davenport, the company’s Chief Executive, said: "The Feed in Tariff has transformed the way the UK generates its power over the last three years, with over 22 per cent of the UK's power coming from renewables in the early part of 2015, and over 700,000 homes generating their own power. It's helped to take us away from the old-fashioned fossil fuel companies to a cleaner, local, more democratic system.
"We hope the government will re-think the value that renewables bring to the market, if you do the calculations you'll see that solar actually brings down wholesale prices of energy.
"It's also going to put the brakes on innovation in the battery storage market, a game-changing technology which would enable households to store their own electricity."
However, Richard Warren, Senior Climate & Environment Policy Adviser at EEF, the manufacturers’ organisation, said: “With the costs of government energy policy surpassing previous projections and, the Levy Control Framework budget already looking like it’s been maxed out, government is right to be getting to grips with the issue.
“DECC’s number one priority has to be delivering emissions reduction at the least cost to consumers and the FiT scheme is palpably incapable of doing this at present.
“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.”
Proposals follow earlier changes to FiT process
Proposals suggested in the consultation come just months after the DECC announced plans to remove pre-accreditation for the FiT, meaning installations could only receive the tariff rate once built, which commentators said would lead to a significant drop in investment.
The move caused considerable consternation in the renewables sector, and prompted Welsh Resources Minister Carl Sargeant and Scottish Energy Minister Fergus Ewing to write to Amber Rudd expressing concern that she risked causing significant damage to the industry.
The consultation for those plans closed earlier this month, and DECC says that the responses are still being considered.
Read the DECC’s consultation on a review of the Feed-in Tariffs scheme.