Solar could become ?plaything for wealthy?

The UK’s Department of Energy and Climate Change has announced plans to reform the solar PV feed-in tariff (FiT) scheme today after concluding the first round of a public consultation, which saw the Government receiving a total of 2,392 responses to its 31October consultation. The Government took the decision to publish the results of the public consultation after losing its appeal to slash solar FiTs at the end of January, in order to “provide greater confidence to consumers and industry”.

Not a scheme for the few but one that will deliver to many

The new Climate Change Minister, Greg Barker, said: “Today we are announcing plans to improve the FiT scheme. Instead of a scheme for the few the new improved scheme will deliver for the many. Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry. We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.

“I want to see a bright and vibrant future for small scale renewables in the UK and allow each of the technologies to reach their potential where they can get to a point where they can stand on their own two feet without the need for subsidy sooner rather than later.”

DECC describes the proposed FIT scheme for consumers and communities as a “scheme for the community,” given that it proposes introducing a new tariff of 21p/kWh (half that applicable before the FiT cuts were announced) will take effect from 1 April this year for domestic-size solar panels with an eligibility date on or after 3 March 2012, but higher tariff reductions for larger installations.

Nevertheless, one concern put forward by the industry relates to the proposal by DECC to include an energy efficiency requirement in the FiT scheme, with householders with properties that do not meet energy efficiency standards possibly receiving just 9p/kWh after 1 April.

The Department said it “has listened carefully to feedback on the energy efficiency proposals that we put forward in the consultation of 31 October,” and plans to require properties installing solar panels on or after 1 April this year to produce an Energy Performance Certificate rating of ‘D’ or above to qualify for a full FiT.
This is an improvement on the previous proposal of a ‘C’ rating or a commitment for all Green Deal measures to be installed, which DECC recognises was “impractical at this stage”.

DECC estimates that about half of all properties are already eligible for a ‘D’ rating, but as solar installer, HomeSun, pointed out in a press statement today, 100% of homes are eligible for the full FiT right now.

“By the Government’s own admission in its FiTs Impact Assessment, the new proposals mean that only 9% of homes would be eligible and only a fraction of those will have a suitable roof for solar PV,” says HomeSun.

The joint Energy and Climate Change and Environmental Audit Committees’ Solar Power Feed-in Tariffs report also warns that “the choice of energy efficiency requirement option by the Government could have a fatal impact on the take-up of the scheme after 2012” and it quotes Which? in saying “Insulation is essential to ensure the value of heat; it is not for electricity unless the householder is using electrical heating.”

Jamie Younger, Partner, Saffery Champness, and a member of its renewable energy group, is also concerned about the energy efficiency clause. “Should this additional tariff of 9p/kWh be introduced, this really removes at a stroke the incentive for anyone to join the scheme with an older property if they also have to undertake the necessary remedial work to achieve an Energy Performance Rating of C or above. This may just be a cut too far, and indeed have the opposite effect from either encouraging people to join the scheme or improving the energy efficiency status of their properties,” he says.

Another proposal put announced today by DECC which is seen as in favour of community uptake of solar PV is that from 1st April 2012, new ‘multi-installation’ tariff rates set at 80% of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. “This reflects the lower costs of such installations, as they benefit from the economies of scale. Based on the feedback received, the threshold is set at more than 25 installations. Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate”.

Exclusive plaything for wealthy

However, HomeSun CEO, Daniel Green, is not convinced. “In today’s announcement the new so called ‘Aggregator’ (multi-installation) tariff includes companies who provide Free Solar to individual, private home-owners. DECC justified this new lower tariff by saying that companies who own many installations have economies of scale – only having to deal with one multi-home owning landlord and being able to install several homes on the same street on the same day. However, this is simply not true for Free Solar for private, individual homes and DECC knows it,” he highlights.

“We agree with DECC and accept multi-home owning landlords should have a lower tariff but why punish the majority of the population who don’t have multiple homes and don’t have thousands of pounds to invest for years in a solar purchase? These people, who are struggling with their energy bills and are looking for some relief from the Big Energy companies have been deliberately excluded without reason. Solar will now become the exclusive plaything of the wealthy who live in the south of England,” Green concludes.

“A better FIT for industry”

In line with the evidence of falling costs for solar PV, DECC is proposing to peg the subsidy levels to cost reductions and industry growth to provide more certainty for future investments. This will ensure that subsidy levels keep in step with the market. It builds on the best of the existing German system and will remove the need for emergency reviews.

Using budget flexibility to cover the overspend resulting from high PV uptake this year, while still allowing £460 million for new installations over the Spending Review period. This won’t have any impact on consumer bills beyond the agreed overall cap on renewable subsidies as it will primarily be funded from an under spend on the budget allocated for large-scale renewables.
Both these aspects are seen by DECC as favourable for the solar industry.

Despite publication of the outcome of the public consultation, the Government still cannot give any certainty on tariff levels to people who install solar panels with an eligibility date between 12 December 2011 and 3 March 2012 due to on-going legal proceedings. DECC is appealing to the Supreme Court and has until 21 February to lodge its case.