DECC’s surprise FiT shortening threatens repairing relationship

It finally seemed that the Department of Energy and Climate Change (DECC) had turned over a new leaf: the importance of solar had been officially acknowledged in the Renewables Roadmap, a special solar team was assembled within the department to help realise these goals, sensible policy was put in place, the Minister ramped up the solar rhetoric – DECC even seemed legitimately sympathetic to industry concerns and added a higher Renewables Obligation rate for roof-mounted solar.

But then…

Ofgem published the feed-in tariff rates starting from 1 May. Nothing surprising there except that, on closer inspection, the stated period was marked down as 1 May-1 July not 1 May-1 August.

After a bit of digging by Solar Power Portal, DECC confirmed that the Ofgem figures where indeed correct: the next FiT period will be a month shorter than previously expected.

How will the accelerated deployment deadline affect the industry?

Firstly, because there has been such a sustained period of disappointing installation levels, the domestic FiT rates (<50kW) have not degressed for two consecutive periods; that means that the rates are due to automatically degress by 3.5% on the next deployment deadline.

That deadline is now one month closer than the industry had anticipated and prepared for – negating the benefit of placing a stable, transparent and predictable FiT degression method.

Secondly, solar is a seasonal product whose demand peaks during the summer months. DECC’s decision to shorten the eligible period therefore robs the industry of a higher FiT rate during one of its most popular months.

Andy O’Leary, Business Development Manager at Sibert Solar told Solar Power Portal that it would be hard to assess what the full impact of the decision would be. “This decision has obviously caused a little consternation in the industry, for a variety of reasons including lack of prior notification of intent, less time to install at the respective rate for that period, staffing holiday adjustments etc.

“These all carry a certain degree of weight. The fact that the install figures will be taken on a pro-rata basis, from a degression trigger point of view, makes sense of course, but we have heard mixed opinion from our customer-base as to the expected impact of this adjustment”

A familiar FiT fallout

The most concerning fallout from this whole situation might be the damage dealt to the solar industry’s relationship with DECC.

Following the FiT fiasco last year there was a critical breakdown in communication and trust between the department and the solar industry. DECC’s recent actions have meant that the relationship had just begun to repair. However, the nature of the ‘announcement’ for the reduced summer FiT period will fire warning shots across the industry’s bows.

Over the three days of Ecobuild there was a real sense that DECC had ‘snuck out’ the reduced period – with no prior warning or discussions with the industry.

As one commentator on Solar Power Portal put it: “Couldn't they [DECC] have announced this on their website before OFGEM released the tariff for July 1st 2013? DECC trying to sneak in changes behind the industries back again? What happened to working with the industry?”  

A silver lining?   

If there are any positives to pick out of the shortened summer FiT period, then it’s this: the UK solar industry has already proved itself very adept at selling solar in the run up to any FiT drop. The new deadline might provide industry with the call to action it needs to motivate potential buyers – although, in the long-term such a sales tactic will only damage the perception of solar in the UK further.

Taking a look at the bigger picture, a 3.5% degression, although not welcome, will not completely kill the market. The more worrying aspect for the industry will be the manner in which DECC dictated the changes to the FiT with no communication, liaison or warning.