The Department of Energy and Climate Change (DECC) is to announce the results of the latest consultation on feed-in tariffs later today, mapping out the rates for solar installations in the UK. In anticipation of this news we’ve put together a list of what to expect.
Clarification of the August 1 deadline
At the end of last week the Minister of State, Greg Barker, announced that his department would be considering delaying the next round of feed-in tariff cuts due to lower-than-expected installation rates since the last chop. After DECC confirmed this news, the Solar Trade Association contacted members to tell them that the new date would likely be moved from July 1 to August 1. Today we expect confirmation of this.
New degression rates
Perhaps most importantly, DECC will today outline exactly how much the existing tariffs will be cut by. The Department has been consulting on tariffs based on the amount of solar installed, rather than introducing an automatic cut.
DECC proposed three options including:
The first option targets average rates of return of around 5-8 percent, with around 5 percent for domestic installations. This produces a tariff of 13.6p for ≤4kW installations. DECC states that this rate would go ahead if deployment exceeds 200MW.
The second rate is slightly higher at 15.7p for ≤4kW installations and is based on deployment figures of between 150MW and 200MW. This reduces the current tariffs by around 25 percent. DECC suggests this will yield an average return of 5-8 percent for most bands.
The last, and highest tariff option, is set at 16.5p for ≤4kW installations. This imposes a cut of around 21 percent from April and is expected to produce a mid-range ROI of 6.1 percent. This option would be DECC’s preference if deployment during March and April is less than 150MW.
However, since installation rates have been so low in the past couple of months, there is also an option D, whereby DECC decides to keep the tariffs at 21p for ≤4kW installations until capacity begins to pick up.
Investor income is expected to be boosted by the increase in the export tariff, which currently stands at 3.1p. This will help to boost the return on investment, which could be lower than expected depending on the tariff cuts announced.
DECC has also be consulting on whether to switch the feed-in tariff system from Retail Price Index linking to the Consumer Price Index. Confirmation on whether this will go ahead is expected later today.
During the last feed-in tariff cut round investors installing more than 25 solar installations were subject to an 80 percent feed-in tariff rate. Industry has been speaking with Government about this decision as there is no real evidence to support the assumption that these projects are actually benefitting from reduced costs. This news will be particularly significant for local authority and social housing schemes.
Length of feed-in tariff
Lastly, the UK solar industry may see the length of the feed-in tariff reduced from its existing 25 year lifetime. DECC could decide to reduce this to 20, or even 15 years.
The Solar Power Portal will be covering the feed-in tariff story as it happens. Keep an eye on the website to stay abreast of the latest news as well as industry comment and analysis.