As the Solar Power Portal team came into the office this morning there were smiles on faces in the wake of George Osborne’s day of axe wielding drama. This, I suspect, is not the scene in many other buildings across London. It seems almost miraculous that after what is being labelled the ‘biggest round of cutbacks in generations’ the solar feed-in tariff escaped unscathed – for now at least.
There was quite a bit of uncertainty surrounding the fate of the FiT in the lead up to yesterday’s Spending Review and while we were quietly confident, our breath was well and truly held during the Chancellor’s speech. As the industry heaves a collective sigh of relief, let’s have a look at what this news really means for the UK renewables sector.
What was actually agreed in the Spending Review about the tariff?
There will be no changes to the (41.3 pence per kilowatt hour) tariff until 2013. However, as with anything, there is of course small print. The DECC’s official comment is:
“Feed-in tariffs will be refocused on the most cost-effective technologies saving £40 million in 2014-15. The changes will be implemented at the first scheduled review of tariffs unless higher than expected deployment requires an early review.”
This means that unless the energy companies are absolutely bombarded with applications for solar installations then the review of tariffs will take place, as planned, in 2012. All changes made at this point will then take effect from 2013 onwards. The efforts made at this point are aimed at saving £40m, or 10%, in 2014 and 2015.
The DECC has not released any details of what the ‘refocus’ will actually entail – whether it means a cap on installed capacity (the amount of megawatts installed), the number of actual installations or another criterion, or whether it will be a physical cut to the tariff rate. On speaking with the DECC we found that no details will actually be revealed to this end until 2012. It has been noted however, that the original FiT legislation does not include mention of a cap on volume, so this would have to be reviewed. The Department was also unable to say just how much is too much in terms of bringing the date for change forward.
What about those who are already receiving the existing FiT?
As was outlined by the Solar Power Portal on September 28, those who are already signed up to the FiT will continue to receive the 41.3p/kWh rate for the full 25 years, as originally promised.
This news is exactly what the renewables groups in the UK wanted to hear. Jeremy Leggett, Executive Chairman, Solarcentury said, “My colleagues and I are delighted that the coalition politicians who understand the potential for UK plc in the unfolding global solar revolution have maintained course with the feed-in tariff. They will not be disappointed, when they review the job statistics in this sector of the greening UK economy two years from now. We look forward to sitting down with the government and deciding on a sustainable reduction for the feed-in tariff in 2013. We well appreciate that this kind of policy is designed to ramp down to nothing over time, as we drive costs down in our industry. Unlike nuclear, we do not need subsidies forever.”
While The Renewable Energy Association’s (REA) PV Specialist Consultant, Ray Noble said of the news, “This is excellent news for the UK solar industry. It’s exactly what the market needs in order to fulfill its fantastic potential. The outcome of today’s review could not have been better.”
And what of the future?
However, while the FiT’s fate is safe for the time being, the Energy & Climate change sector did of course receive some bad news. A total of 2.9bn will be cut from the budget as work by associated bodies (such as the Carbon Trust) is reviewed, and administration costs are sliced by 33%. The sector must now concentrate on reaching the 15% emissions target by 2020 and adhering to the energy policy as outlined by the UK government. Overall the sector will face an 18% spending cut, yet £200m will be set aside for investment in low-carbon technology.
Since the renewables industry is relatively infantile in comparison to many other sectors, it is great to see that the government’s support is behind it. With drastic cuts to the public, transport and health sectors (to name a few) we can count ourselves extremely lucky that the FiT was left alone for a few years.