Feed-in tariff cuts could have been avoided

Independent consultants Ernst & Young have today published an in-depth report focusing on the future of the 50kW to 5MW solar industry after the Government cast yet another shadow of uncertainty over the fledgling market. The UK Solar PV Industry Outlook Report highlights how the deep 70% cuts to feed-in tariff rates could have been avoided, meaning larger-scale solar energy projects would be commercially viable while also sticking to the all-important budget.

At present much of the medium-to-large-scale solar industry faces collapse, as the feed-in tariff will be reduced dramatically for all systems over 50kW, with those over 250kW receiving just 8.5p per kilowatt hour. Ernst & Young’s report highlights neither the cut down levels due to go ahead from August 1, nor the alternative Renewables Obligation – which sees solar receive two renewable obligation certificates (ROCs) – is sufficient to maintain the industry in the UK.

The report argues that marginally higher feed-in tariff rates of between 20p and 24p per kilowatt hour for solar installations between 50kW and 5MW could be the answer. These rates would result in an internal rate of return of 5% for project developers, allowing some of the larger solar farms and community-backed projects could go ahead.

Ernst & Young also demonstrates that feed-in tariff rates of 16p to 21p/kWh would also allow projects to proceed if the UK adopted a net metering scheme, which would mean that solar electricity exported to the grid was paid its true wholesale market value, as opposed to being bought at a price much lower than the retail rate.

Calculating that if silicon prices continue to decline to a possible 17%, the report also shows how the sector could reach grid-parity by 2017, which would mean delivering solar power at the same price as the grid.

The Solar Trade Association is now calling for informed decision making based on a transparent framework and an accurate analysis of the potential and role for solar in the UK.  The STA highlights that current Government policy must be based on up-to-date cost inputs, full assessment of benefits, and full consideration of strategic and practical arguments. It is hoped that by outlining a way forward, the solar industry can push Government to provide the support it needs.

To read the report in full, click here.