By Dave Elliott
The battle over the UK PV solar Feed-In Tariffs (FiTs) continues, following on from the cuts of around 50% proposed by the government. That had led to major protest by PV companies and environmental groups, with a ‘Cut don’t Kill’ campaign emerging, founded by a coalition of 20 major companies from across the solar industry. It kicked off with a Westminister demonstration calling for revision of the plans. While some reductions in the FiT were seen as fair, the scale and timing of the cuts (to be backdated to last December) were not, and would, it was claimed, cripple the industry. Alan Simpson a one time Labour MP, who has helped create the FiT system, noted that PV was ‘the only sector that has delivered 25,000 new and sustainable jobs in the last 18 months’.
There were also disputes over some of the numbers used. Thus Energy Minister Greg Barker had said that the new 21p/kWh FiT for 4kW or under ‘will attract the highest level of any subsidy of mainstream technologies’. But critics pointed out that micro wind turbines under 1.5 kW got 36.2p/kWh while those with under 15 kW received 28p/kWh. The trouble with this argument is that all the FiTs, these included, were under review- and they may get cut to below PV!
MP’s debated the proposals just before Christmas, but, despite heavy lobbying, a motion opposing the PV FiT cuts was defeated by 292 to 220. Undeterred, Friends of the Earth, Solar Century and Home Sun then sought and obtained backing for a legal challenge from High Court Judge Mr Justice Mitting, who said ministers were ‘proposing to make an unlawful decision’ and as a result the court would be ‘amenable to a judicial review’.
In January DECC submitted an appeal in which they noted that ‘the High Court’s decision was based on the view that the proposed approach to implementing new tariffs for solar PV is inconsistent with the FIT scheme’s statutory purpose of encouraging small-scale low-carbon electricity generation’ But DECC said ‘The overriding aim of the proposed reduction in tariffs for solar PV (as set out in the recent consultation) is to ensure that over the long term as many people as possible are encouraged to install small scale low-carbon generation (including other technologies as well as solar PV) and benefit from the funding available for the FIT scheme. Without an urgent reduction in the current tariffs, which give a very generous return, the budget for the scheme would be severely depleted and there would be very little available for future solar PV generators, or for other technologies. Our view is that the urgent steps we have proposed to protect the scheme for the future are fully consistent with the scheme’s statutory purpose’. It also said that ‘the judicial review was premature as no decision has yet been taken, and a decision will only be taken after a full analysis of the responses to the consultation’.
Meanwhile, Energy secretary Chris Huhne acknowledged the difficulties experienced by solar firms as a result of the government’s decision to cut incentives with just six week’s notice, promising that the government ‘will try harder next time’ to minimise disruption caused by changes to the feed-in tariff scheme. But he said the ConDems had inhererited the system from the previous administration. He was reported to have complained that the fact the feed-in tariffs did not include an automatic degression mechanism for reducing the level of incentives meant the government had no choice but to impose the cuts at short notice, after “massively attractive” tariffs combined with a “dramatic crash” in panel prices had led to a surge in installations that threatened to push the scheme over budget. Critics pointed out that in fact the government could have adjusted it earlier without causing so much dislocation, and that, in fact, the PV tariff , as initially planned, did have a built-in annual price degression mechanism- set at 7% p.a for all categories. And at the time of the launch of the FiT scheme, DECC said it would increase the degression rate by a further 0.5% from 2015, although the start of the degression process was delayed by a year. The final pattern of planned reductions (for all the FiTs) is shown in a helpful table abstracted at www.peterlennard.com/fit.pdf.
Be that as it may, as it turned out, a more substantial degression may have been needed, DECC had initially estimated that the FiT would put £11p.a. on consumer bills by 2020. The ConDems had upgraded this to £26 and used that to justify the cuts, no doubt also reacting to the spate of media stories about green policies being a major part of the £200 or so some said had been put on bills, and the talk of £2k or £3k bills by 2020.
However, that’s all now been put in proper perspective with the governments advisory Committee on Climate Change reaffirming that it was gas prices that had led to most of the energy price rise- 64% of price rises were caused by increasing wholesale energy prices and only 6.5% by support for low-carbon energy. Households that have dual-fuel (gas and electricity) bills had seen their energy costs rise from £605 in 2004 to £1060 in 2010, an increase of 75%. But only £30 – or 6.5% – of this increase related to support for low-carbon energy, compared to £290 for increasing costs of gas and supplier costs. It said that green policies overall would only add around £110 to annual bills per household in 2020, and it could be just £25 if the energy savings programme was successful.
Independent green energy retailer Good Energy, have argued that the direct cuts in tariff levels for PV may not actually be the biggest issue in term of slowing PV growth – the proposal to limit FiTs to buildings reaching a high set level of energy efficiency (above ‘C’) could have even more impacts. Good Energy said that only about 10% of UK homes would be eligible and that the Green Deal upgrade loans won’t actually change that- at best getting to an ‘E’ rating. So most homes will remain ineligible.
Overall it does look as if, one way or another, the PV programme has been boxed up. We now await the proposals for the FiTs for the other renewables. Further cuts are expected.