FiT cuts 2011: DECC proposes 21p rate; December deadline

After weeks of speculation, rumour and conjecture the Comprehensive Feed-in Tariff (FiT) document has finally been published. This morning, shortly after 10.30am, the UK Department of Energy and Climate Change (DECC) revealed what lies in the future for solar power in the UK. The consultation will close on 23 December 2011.

As expected, DECC has decided to cut the FiT rate for solar power by more than 50 percent, a move which is expected to generate a mixed response from those currently working in the industry. The proposals, which are subject to consultation, would introduce a new tariff for schemes up to 4kW in size of 21p/kWh – down from the current 43.3p/kWh. Reduced rates are also proposed for schemes between 4kW and 250kW.

The move to slash feed-in tariff rates by such an amount was highly anticipated after the Climate Change and Energy Minister Greg Barker last week explained how the UK industry is growing faster than the budget will allow.

“My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust.

“The plummeting costs of solar means we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FiTs scheme. Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year,” he explained.

The Minister also outlined that while changes would not go through in December  –  as was recently feared  –  the new proposed tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011. These installations would receive the current tariff rates before moving to the lower tariffs on 1 April 2012.

DECC reiterates that consumers who already receive feed-in tariff payments will not be subject to change, and those with an eligibility date on or before 12 December will receive the current, higher rates for 25 years.

The eligibility date of a project is based on it being commissioned (in working order) and having its request for accreditation received by a FIT licensee (schemes up to 50kW) or Ofgem (more than 50kW).

DECC maintains that the proposed new tariffs will offer a rate of return of around 4.5% to 5% index linked and tax free (for domestic installations) for “well-situated solar PV – broadly comparable to that intended when the scheme was set up.”

Today’s consultation also proposes:

  • A new energy efficiency requirement that would mean from 1 April 2012 a property would have to reach a certain level of energy efficiency to receive the proposed new tariff rates. This could include reaching an Energy Performance Certificate level of C or taking up all the measures potentially eligible for Green Deal finance, depending on the outcome of the consultation. As a transitional arrangement, installations with eligibility dates between 1 April 2012 and 31 March 2013 would have 12 months from the eligibility date to comply with the energy efficiency requirement.
  • New multi-installation tariff rates for aggregated solar PV schemes, i.e. where a single individual or organisation owns or receives FITs payments from more than one PV installation, located on different sites. The new tariff rates would apply to all new PV installations that are part of an aggregated PV scheme and have an eligibility date on or after 1 April 2012. The new tariffs are set at 80% of the standard tariffs for individual installations.
  • Considering whether more could be done to enable genuine community projects to be able to fully benefit from FiT and whether, for example, a definition of community scheme is required and if so, how this should be defined.

Industry reaction to the proposed rates and further analysis will follow later today.