FIT Changes Announced
Energy Ministers have confirmed they are to push back cuts to the Feed-in Tariff for solar PV from July 1 to August 1 as they unveiled another set of new regulations.
The new tariff for domestic solar installation will be set at 16p/kWh, down from the current level of 21p and the rates will continue to decrease by up to 28% every three months, with a promise of pauses if the market slows down.
The FiT scheme lifetime will also be reduced from 25 years to 20 years for new solar installations.
However, to better reflect the real value of electricity exported to the grid, the Government says it will increase the export tariff from 3.2p to 4.5p/kWh.
DECC says the new rule changes will provide better value for money and should give a return on investment (ROIs) of over 6% for most typical, well-sited installations, and up to 8% for the larger bands.
And a new solar PV cost reduction taskforce has been launched by the Government in partnership with industry to help drive down costs down faster while maintaining safety and standards.
In a statement, Energy and Climate Change Minister Greg Barker said: “Today starts a new and exciting chapter for the solar industry. The sector has been through a difficult time, adjusting to the reality of sharply falling costs, but the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector.
“We can now look with confidence to a future for solar which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain’s clean energy economy.
“I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.”
According to the Solar Trade Association, DECC has now provided the resources to achieve around 800MW to 1,000MW of solar installations each year to 2015, which it claims is more per annum than the original FIT scheme anticipated over five years.
STA Chief Executive Paul Barwell, commented: “This now provides the industry with the security of guaranteed tariffs to 2015 allowing it to build for the future. The STA is pleased to have won its ask for quarterly reviews with more responsiveness to market size, and less emphasis on automatic tariff cuts.
“We remain very concerned that the market has stalled, and the recession certainly hasn’t helped. However, today’s announcement means we can now be confident that even when tariffs are adjusted on 1st August, solar will still offer attractive returns to consumers – certainly when compared to other investments currently available.
“It is vital consumers understand tariffs can come down because the costs of solar have come down – there is a faulty perception out there that cuts mean solar doesn’t pay. In fact, solar offers similar returns today as when the FIT scheme began because the industry has been so successful at reducing technology and installation costs.
“Furthermore, the relative income from a PV system is likely to be better than DECC suggests today because energy bills are set for another significant increase this year. So we expect to see more and more people turning to solar to save money, not just the planet.
“Today’s announcement should help restore confidence about the stability of the industry and Government’s commitment to the growth of this sector.”
Changes to solar Feed-in Tariffs, include:
Tariffs for solar pv installations to be reduced from 1 August:
* 16p/kWh for household scale solar pv installations to reflect fall in cost of the technology, delivering a return of about 6% for a typical installation.
* Tariffs for larger installations also to be reduced to reflect cost reductions but with most tariff cuts lower than proposed in February.
* Reductions to apply to new installations from 1 August, instead of 1 July as proposed, in recognition of low uptake from 1 April and providing time for industry to adapt.
Multi installation tariff increased to 90% of standard tariff:
* Organisations with more than 25 solar pv installations will get 90% of the standard applicable tariff, increased from 80%, reflecting new evidence on costs involved for these projects.
Reduction in tariffs over time in line with uptake of FITs scheme:
* Ensuring solar PV is not over subsidised.
* Average tariff reductions of 3.5% every 3 months, reductions will be bigger (up to 28%) if there is rapid uptake.
* Tariff cuts will be skipped (for up to 2 quarters) if uptake is low.
* Uptake in 3 different bands (domestic (size 0-10kW), small commercial (10-50kW) and large commercial (above 50kW and standalone installations) will determine the quarterly reductions within those bands.
Increase export tariff from 3.2p to 4.5p/kWh
RPI index-linking of generation tariffs to be retained
Scheme lifetime reduced from 25 to 20 years for new solar installations
* Reducing the lifetime costs of the scheme and bring solar in line with most other technologies supported under FITs.
Tariffs for installations which do not meet the energy efficiency requirements will mirror the tariffs for standalone installations
* Ensuring energy efficiency is still encouraged as tariffs are reduced.
STA Chairman Alan Aldridge concluded: “The fact is solar is one of the best investments in town for householders. We need Government now to work with us in this very difficult economic climate to get the message out that this tremendous technology is a great investment.”
DECC says decisions following the consultation on the other technologies under FITs will be announced in the summer.
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