Government to end Feed-in Tariff scheme
When the Government twice reduced the Solar PV tariff rate (Feed-in-Tariff, or FiT), the demand for equipment rapidly outstripped supply and many companies missed out – now, the popular FiT is ending, demand for equipment and installation is rising very rapidly.
And with some of our clients benefiting from £45,000 per annum income for the next twenty years (£900,000 total income), the fact the scheme is ending really is significant to any business still wondering if Solar PV is for them.
The plans propose a strict cut-off date on March 31 2019, with no special provisions for projects in oversubscribed areas. This means that if businesses leave it too late and miss the installation cut-off date, they will not benefit from the FiT.
The scheme closure is expected to save the average household £1 a year on energy bills, according to the government’s Impact Assessment, compared to letting it run for an extra five years.
So the popular FiT is ending -what’s the story behind this?
The Feed-in Tariff (FiT) Scheme, an incentive scheme that has driven the growth of small and mid-sized renewable generation projects across the UK since 2011, is set to close on March 31st 2019 under new plans set out by the government.
A recent consultation launched by the Department of Business, Energy and Industrial Strategy (BEIS) sets out plans to end the FiT, which pays domestic and commercial green energy generators and exporters for electricity they produce for the grid.
The success of the scheme has exceeded all expectation, driven in early years by generous subsidies and later by rapidly falling technology costs leading to unprecedented deployment. In total, the FiT has delivered around 6GW of clean energy capacity over 800,000 installations. But critics have also argued the scheme has eaten into budgets for clean energy subsidies funded via energy bills, leading to higher ‘green levies’ while delivering emissions reductions at a higher cost than larger scale projects.
The government argues that as renewables costs have fallen the sector no longer needs such a generous subsidy regime. It decided in 2015 that the popular FiT is ending to new generation tariffs from March 2019, leaving only the export tariff running. It is now proposing to fold that closure into the winding down of the entire scheme by March 2019.
“Our energy system is changing; technologies such as storage are expected to play an increasingly important role and government seeks to move away from driving deployment with direct subsidies,” the consultation explains.
“It is our view that the current FITs flat rate export tariff does not align with our vision for the future, given our desire to move towards fairer, cost reflective pricing and the continued drive to minimise support costs on consumers, as well as supporting the vision set out in the Industrial Strategy and Clean Growth Strategy published last year.”
The government also recently published a Call for Evidence on what support it should provide in the future for green power generation.
“In publishing this call for evidence, I want to understand what the opportunities and challenges are for the sector; to give them the opportunity to demonstrate the options available to provide benefits to the electricity system and UK consumers; and to build a strong consensus for action,” Energy and Clean Growth Minister Claire Perry wrote in the foreword.
“However, while we want to seize this opportunity, we must do so in a way affordable for consumers,” she added. “I know that this cannot be achieved by government alone – it requires collaboration. I look forward to listening to what the sector has to say and working with them to realise our shared ambition for the industry.”
The document insists that small-scale low-carbon electricity generation should be able to compete with other power sources without direct subsidy, suggesting it is unlikely another FiT-like subsidy programme will be launched.
However, the government has indicated it will consider changes to regulation to help guarantee small-scale generators a route to market or access to multiple revenue streams.
Green groups expressed frustration at the news, arguing that the FiT scheme has helped popularise renewables with the public, driven down costs for the industry as a whole, and led to a relatively small impact on consumer bills.
The Solar Trade Association (STA) said the solar sector urgently needs some clarity about what the policy framework for small-scale low-carbon generation will look like following the FiT closure, with CEO Chris Hewitt accusing the government of being “frighteningly vague” about its plans.
“The good news, as we look beyond FiTs, is that solar is coming of age and while solar always makes great environmental sense it now makes economic sense for most investors without public subsidies given fair treatment by government,” he said.
“The bad news is that government has been crystal clear today on what policy measures will stop – even very basic rights to fair export payments – but it is frighteningly vague on what comes next. There is real dismay that there is now a serious and needless policy gap between the end of FiTs and the start of the new regime.”
His comments were echoed by James Court, head of policy and external affairs at the Renewable Energy Association. “It is pleasing to hear positive words about renewables from the government, but this has to be backed up by good deeds,” he said. “While nobody in the industry was expecting an 11th hour reprieve for the Feed-in Tariff, the removal of the ‘export tariff’ for new projects will lead to the truly bizarre situation where consumers who own technologies such as solar will give electricity they don’t consume to the grid for free.
“Post-subsidy could be a reality, but in an energy market where nothing, not even gas power stations, can be built without government support, it is unrealistic to expect consumers, businesses or developers to continue installing small scale generation. This could be achieved by tax incentives, market enablers, and planning or building regulations, but we are currently left in an unnecessary policy vacuum without any firm proposals put forward by government.”