DECC to 'cut solar subsidies' on Feed-in Tariff scheme

Published by Ross Macmillan for 24dash.com in Central Government and also in Communities, Environment

Subsidies for larger solar electricity schemes could be slashed under plans outlined by the Government.

Ministers have said they are concerned about commercial "solar farms" benefiting from incentives designed to boost small scale green electricity projects.

The feed-in tariffs (FITs) scheme pays people for the electricity they generate from small scale renewables installed on homes, schools, communities and businesses.

But the Government said evidence showed dozens of large scale solar schemes were in the planning system as companies bid to cash in on the incentives for the green energy.

The Department of the Energy and Climate Change (Decc) has published proposals to significantly reduce the support for all schemes above 50 kilowatts (kW) - the equivalent of putting solar panels on around 20 homes.

The rates would see the biggest projects paid just 8.5p for each unit of green electricity they produce, instead of more than 30p under the existing arrangements.

Mid-size schemes would also see their subsidies slashed by as much as half under the proposals put out for consultation.

Climate Change Minister Greg Barker said: "Our cash for green electricity scheme is a great way to reward homes, communities and small businesses that produce their own renewable power.

"I'm committed to an ambitious roll-out of microgeneration technologies as part of the coalition's green vision of a much more decentralised energy economy."

He said the proposals would stop larger scale solar schemes "soaking up the cash" that should go to homeowners who install solar panels, and to other renewables such as small scale hydropower or wind turbines.

"The FITs scheme was never designed to be a profit generator for big business and financiers," he said.

"Britain's solar industry is a vital part of our renewables future and our growing green economy.

"The new tariff rates we're putting forward today for consultation will provide a level of support for all solar PV and ensure a sustained growth path for industry."

But Howard Johns, chairman of the industry body the Solar Trade Association, said the review of solar subsidies was even more damaging to the sector than had been anticipated.

He said: "Given that just a week ago the UK Government launched its own 'Carbon Plan' outlining how it will become the greenest government ever, this review is a complete disaster for the solar industry and comes at a time when we should be focusing on building renewables and harnessing the power of our natural resources.

"In one of the few low-carbon sectors that is increasing employment figures, strengthening an economy and offering prospects for the younger generation, it seems extraordinary that the coalition have decided to launch this consultation.

"Costs of solar are dropping and oil prices are rising fast, solar technology could easily meet a third of UK electricity needs.

"By announcing the FIT review, the coalition Government has failed to show the solar industry the support that it pledged before it came into office."

Under plans outlined today, the Government is proposing reducing the support for all new PV installations larger than microgeneration size (50kW) and stand alone installations. The new proposed rates are:

• 19p/kWh for 50kW to 150kW
• 15p/kWh for 150kW to 250kW
• 8.5p/kWh for 250kW to 5MW and stand-alone installations

These compare with the tariffs that would otherwise apply from 1 April of:

• 32.9p/kWh for 10kw to 100kw
• 30.7/kWh for 100kw to 5MW and stand-alone installations

Such changes are in line with amendments made to similar schemes in Europe where in Germany, France and Spain tariffs for PV have been reduced sharply over the past year.

Alongside the fast-track review of solar, a short study has also been undertaken into the lack of uptake of FITs for farm-scale anaerobic digestion. The study suggests that the tariff for this technology is not high enough to make such schemes worthwhile. The proposed new tariffs are:

• 14p/kWh for AD installations with a total installed capacity of up to 250 kW
• 13p/kWh for AD installations with a total installed capacity of between 250 kW and 500 kW

These compare with the tariffs that would otherwise apply from 1 April of 12.1p/kWh for AD up to 500 kW.

Government policy is specifically to deliver an increase in energy from waste through anaerobic digestion, not to promote energy crops, particularly where these are grown to the exclusion of food producing crops. DECC is talking to Defra and others about the best way to implement controls to make sure this does not happen.

The Government said it will not act retrospectively and any changes to generation tariffs implemented as a result of the review will only affect new entrants into the FITs scheme. Installations which are already accredited for FITs will not be affected. Solar PV installations less than 50kW are not affected by this fast track review.

These changes are proposed to be implemented in advance of the comprehensive review of FITs, which is currently underway and will look at all aspects of the scheme.

Gaynor Hartnell, chief executive of the Renewable Energy Association, said the Government's move, which she described as pulling the rug out from under the feet of those who had ventured into the market was "precisely the wrong response".

"Larger PV projects are cheaper, and have a major role in driving down costs," she said.

"The UK will return to the solar slow lane. It's as good as a retrospective change and that does untold damage to investor confidence.

"It's not acceptable and we will fight it."

Environmental consultancy WSP Environment & Energy said the changes, designed to stop solar farms in fields "carpeting" the countryside, would also damage large roof-top solar panel schemes.

Chris Stubbs, director at the consultancy, said the reduction in tariffs would make many schemes unviable, while not saving the Treasury any money.

The proposals put out today also include slightly raising the support for producing energy from waste such as farm slurry, known as anaerobic digestion, following concerns that the existing subsidies are not enough to make schemes worthwhile.

Environmental groups criticised the plans, which they said would hit renewable projects in communities, schools and small businesses.

Greenpeace chief scientist Dr Doug Parr said: "As the world struggles with the problems that nuclear power can bring it is bizarre and short-sighted that UK is knifing the support levels to community scale solar developments.

"Solar and other renewable energy can bring jobs and industry to the UK and avoid fossil fuel imports - if the coalition means what it says on green growth this looks like the wrong decision at the wrong time."

Friends of the Earth head of policy and campaigns Craig Bennett said: "These proposals would devastate support for community-scale solar energy projects - preventing schools, councils, businesses and housing estates from earning and saving money by creating green power.

"Faced with the urgency of cutting carbon emissions and generating green electricity, this is exactly the opposite of what the UK needs - and flies in the face of coalition promises.

"The Government should treble targets for powering our homes and communities with renewable electricity to create new jobs and boost investor confidence."

The Government plans to bring in the changes to solar incentives in August, while a full review of the feed-in tariffs will implement any further changes in 2012.

Green Party MP Caroline Lucas said the changes to the solar tariffs for larger-scale schemes showed a "shocking lack of ambition on solar energy" by the Government.

"That this misguided consultation comes at a time of serious public debate over the safety of nuclear power is particularly irresponsible - surely now is the moment for the Government to show commitment to developing clean, renewable energies for the future?

"In light of the solar debacle, it will be difficult for any renewables company or investor to trust this Government again," she warned.

Andrew Lee, head of international sales at Sharp Solar, said: "We agree that the issue of solar farms needed to be addressed. However, this over-zealous proposal will wipe out community projects like installations on schools, hospitals and churches, will halt business and industrial investment, and will limit solar to small-scale domestic projects.

"This is terrible news for the renewable energy sector - the steep rise in job creation will stop and morale within the industry will drop as a result of this remarkable U-turn."