DECC answers industry questions

The Department of Energy and Climate Change has announced that it is tabling proposals before Government to provide certainty over feed-in tariff rates from March 3.

A DECC representative has explained to Solar Power Portal why the department has taken the decision to table the proposals.

After it became apparent that the Court of Appeal’s judgement would be delayed, with no certain outcome in sight, DECC decided to put in place a contingency plan that brings a 21p rate into effect from April for installations with eligibility dates on or after March 3.

DECC believes that the cost of losing the Judicial Review (and returning to 43.3p) could be around £100 million in subsidy costs per annum – an additional £1.5 billion over the lifetime of the tariff.

DECC is very clear that, although the move is labelled as a “contingency plan”, it should not be read as an indication of impending defeat in the courts. DECC is still hopeful that it will be granted appeal, win the case and be able to reinstate the December 12 reference date as originally intended.

A DECC representative explained what solar companies should tell their customers: “Our proposal to offer a tariff rate of 21p from April 2012 to installations following a December reference date remains firmly on the table. In the event that we lose, then, for a very limited time, the tariff will be 43.3p for eligible sub 4 kW systems. This action today reduces the length of time which this over compensation can continue.”

DECC cannot disclose what the latest figures of budget against spend under the feed-in tariff are, because “figures change day by day as new installations are registered, but the total budgetary impact is impossible to determine as we don’t yet know if we will have to pay 43p for next 25 years for all installations between December 12 and April 1, nor how many of these installations there will be.”

When asked if the budget for the scheme had already been spent, DECC explained that under the terms of the levies control framework, the department’s levies policies have an aggregate annual spending limit, as DECC is currently working through consultation responses on both the FiT review and Renewable Obligation banding review it is impossible to provide precise estimates of future projections. DECC does admit that under current deployment trends, the levies cap would be breached in 2012/13 and 2013/14.

The Department is also able to propose feed-in tariff cuts as part of the consultation it launched in October, which received over 2,300 responses. The tabled proposals form DECC’s response to Question 1 of the consultation document.

If DECC wins the appeal then it intends to announce its final policy intention on phase 1 proposals (tariffs for solar PV, multi-installation tariff rates and energy efficiency) as soon after the judgement as possible. The High Court has recognised the urgency of the situation and has pledged to make a decision on or before February 9. 

DECC has reiterated that it is acting in the interest of the solar industry, to provide clarity so that the feed-in tariff scheme can continue. The department has also insisted that it has not put forward the proposal in parliament in response to Friends of the Earth’s calls; it is simply a contingency that allows the management of the budget and provides certainty to installers and consumers nationwide.

The tabling of proposals before parliament leaves the industry with two possible outcomes, explained the DECC representative: “Either we win the appeal and all the consultation proposals are back on the table. Or we lose and this action means that everyone knows what the tariff will be, if that happens – we are providing certainty.”

Want to know more about the future of the UK solar industry? Why not join the Solar Power Portal team at the Solar Power UK Roadshow 2012: Coping with the Cuts - coming to a town near you.