By Dave Elliott
DECC’s consultation document on the Feed In Tariff (FiT) says: ‘The future and size of the scheme will be determined by affordability criteria’, with the Levy Control Framework limits clearly being central. It goes on: ‘If following the consultation we consider that the scheme is unaffordable in light of these criteria, we propose ending generation tariffs for new applicants from January 2016 or, alternatively, further reducing the size of the scheme’s remaining budget available for the cap. This consultation seeks views on the impacts of scheme closure, whether implemented in the immediate term or as a phased closure over several years’. This seems not so much a consultation as an ultimatum: accept interim cuts or the whole thing goes now, but it will end anyway with, they say, their proposed ‘more stringent degression mechanism and deployment caps leading to the phased closure of the scheme in 2018-19’.
The FIT has been very successful, providing support for homeowners to buy into PV solar on a significant scale – nearly 4 GW so far. That’s what most of the FiT support has gone to. But with costs falling (for PV especially), DECC evidently sees no reason for the FiT to continue: sooner or later it must go. In their interim proposals, PV gets hit hardest, with support for domestic roof-top schemes (under 4 kW) cut massively, from 12.47 p/kWh to 1.63 p, but small wind also gets hit: the tariff for micro-wind (under 50 kW) falls from 13.73 p/kWh to 8.61 p, and for larger projects (up to 500 kW) from 10.85 p/kWh to 4.52 p – more than halved. Projects over 1500 kW will get no support. Micro hydro (under 100 kW) gets cut from 14.43-15.45 p/kWh to 10.66 p. There are also capacity caps proposed for each technology band, with prices being further reduced in stages, by 5% and 10%, up to a cut-off point. For PV, that in effect limits total quarterly new capacity to 42 MW, or 170 MW per annum. Last year 660 MW was installed.
DECC says the proposals would cap new FiT expenditure at £75-100m by 2018/19. Although all this of course assumes the whole thing doesn’t get halted, at least for new projects. But in either case, as DECC’s Impact Assessment admits, carbon emissions will rise. And all this on the basis of staying below the limits set by the Levy Control Framework, which caps expenditure on green energy subsidies (including the RO and CfD support schemes). The LCF cap has been set at £7.6 bn for 2020/21, but the DECC consultation includes a chart depicting the FiT as taking it well over that. So it has to go! www.gov.uk/government/consultations/consultation-on-a-review-of-the-feed-in-tariff-scheme
The Solar Trade Association tried to mount a damage control exercise. It saw the proposals as premature and damaging. It would ‘push the industry over a cliff when it is so near to being able to repay public investment through lower & more stable bills in future – as well as tens of thousands of jobs. A sudden cut combined with the threat of scheme closure is a particularly bad idea – it will create a huge boom and bust that is not only very damaging to solar businesses and jobs but does nothing to help budget constraints.’ www.solar-trade.org.UK/solar-industry-reeling-at-self-defeating-feed-in-tariff-proposals
The LCF limits and the FiT pass-through costs to consumers aside, a key issue for the future seems to be that “prosumer” PV may load up extra costs on the system. DECC note that ‘at periods of peak PV generation there may be additional, rather than avoided, distribution and transmission costs if power flows put pressure on the network infrastructure’. They admit that ‘where PV generation coincides with periods of high demand it can be valuable in reducing power flows on the network’, but clearly they are worried about the impacts of prosumer PV generation. They are also worried about the export tariff paid for surplus power sold back to the grid: ‘Over the course of 2014, the spot wholesale electricity price fell below the export tariff.’ Although the prosumers’ export tariff will be retained ‘as a route to market for the renewable electricity they generate’, DECC says a cut, down from its current 4.85 p/kWh, is an option. Alternatively a more flexible system might be adopted: ‘the price paid for exporting energy remains static and customers have no incentive to store energy produced at times of low demand for use during times of peak demand. It may be appropriate in the future to consider how the export tariff can more accurately reflect the value to electricity suppliers of electricity exported onto the grid’ with an annual price reset or, more dynamically, variable pricing via smart metering, being options. There may also be changes to the (inflation) index linking system. But all this tinkering aside, it’s pretty clear DECC wants the FiT as we know it to go…and soon. So all we are left with is a debate about timescales.
Being optimistic, you might see all this as indicating how successful FiTs have been (around the world) at getting prices down: subsidies were no longer needed. But, as the STA says, the cut-backs may prove to be too abrupt and disruptive. At the very least they want a more tapered phase-out of support to minimise damage, but would prefer a more positive approach and have called on the Government ‘to work with the solar industry to deliver our plan for a stable glide path to subsidy-free solar’. The STA’s Solar Indepedence plan called for a 25 GW PV target: www.solar-trade.org.uk/solar-independence-plan-for-britain/
DECC has said in the past that up to 20 GW might be possible by 2020, but they are loath to set targets: it’s up to the market. There is also a parallel policy line at work, based on the view that large solar farm projects were intrusive and inappropriate – taking up arable land. Projects over 5 MW were mostly supported under the Renewables Obligation, but have now been blocked from it. Now the FiT, which can support projects up to 5 MW, is also being squeezed. It all seems to be part of an attack on what PM David Cameron was alleged to have described as “green crap”, with support for on-land wind also being cut. There are certainly some local objections to wind farms. But PV solar has much wider public support, and although PV is currently more expensive than wind, the FiT as a whole was predicted to only put an extra £22 on consumers’ typical annual power bills by 2020: www.gov.uk/policy-impacts-on-prices-and-bills
Oddly though DECC seems to have removed the section of its regular public opinion surveys that asked for reactions to specific renewables. Previous surveys indicated very strong backing for PV solar, at 80% or more. http://www.ow.ly/QBMy3
PV solar is booming globally and will soon be nearing 200 GW. Wind is well ahead of that, nearing 400 GW, but we need all the sources we can get. It will be tragic if progress in the UK, already quite weak, slows. The new Contracts for Difference support scheme is very unlikely to support much PV (it’s meant for large projects) or marine renewables, and has been blocked for onshore wind. And now the FiT is being hollowed out. Apart from offshore wind, so far mostly untouched by cuts, it doesn’t look promising…