UK fed-up tariff: whatever next?

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Emma Hughes
Emma Hughes
Live from the London office, Emma Hughes delivers her opinion on solar feed-in tariff schemes around the world as well as offering her unique take on the burgeoning UK market.

This blog originally appeared on the Solar Power Portal.

As the well-known song puts it, I don’t like Mondays. However, while I can usually cope with them, coming into the office at the beginning of the week to read about how the UK's Energy Secretary Chris Huhne has decided to launch an early review of the feed-in tariff made me want to turn around and walk straight back out the door.

As reported (with displeasure) on Monday morning, Huhne announced:

“The renewables industry is a vital piece in the green growth jigsaw and this review will provide long term certainty while making sure homes, communities and small firms are encouraged to produce their own green electricity.

“Large-scale solar installations weren’t anticipated under the FiT scheme we inherited and I’m concerned this could mean that money meant for people who want to produce their own green electricity has the potential to be directed towards large-scale commercial solar projects.”

So same old twaddle then.

I don’t know about you, but I’m getting a bit sick of being fed lines by our Government that I’m just supposed to swallow, no matter how caustic. This news just adds insult to already inflicted injury and there’s just no need for it.

So, in order to create some sort of cohesion to my furious response I’m going to break my points down into three digestible chunks.

1. What’s my problem?

Some of you out there may be wondering where my indignant comments are coming from; after all, we knew this would happen, right? Well…yes and no.

For weeks I have been rattling on about how the Government has been ‘threatening’ the UK solar market, with especial attention paid to the future of the feed-in tariff. Until yesterday this was all it was, a threat. However, now that this warning has come to fruition, it doesn’t look anything like what we expected.

The main points outlined in the review include:

·        Assessment of all aspects of the scheme including tariff levels, administration and eligibility of technologies;

·        Completion of the review by the end of the year, with tariffs remaining unchanged until April 2012 (unless the review reveals a need for greater urgency);

·        Fast-track consideration of large-scale solar projects (over 50kW) with a view to making any resulting changes to tariffs as soon as is practical, subject to consultation and Parliamentary scrutiny as required by the Energy Act 2008.

Now, there are more than a few surprises in there.

Let’s begin with bullet point one: nothing too out of the ordinary here, apart from, of course, any kind of explanation outlining what on earth this ‘assessment’ could involve. What kind of administration changes will be made? Are all tariff levels under threat, or is it just the large-scale ones? Technology eligibility? Will some renewable energy sources be scrapped altogether?

I’m sorry to disappoint, but I don’t actually have the answers to any of these questions. I’m not sure I ever will.

Point two: alright, so the tariffs will remain unchanged until April 2012; we knew that. But hang on, “unless the review reveals a need for greater urgency” – what does that mean? Is this the same ‘trigger point’ we have been hearing about since the Comprehensive Spending Review (CSR), and if so, will someone please tell me what it will look like. How much solar is too much? Why is the Government not telling us?

Point three: 50kW? What the..? Since when was 50kW considered ‘large-scale’? At present the policy includes a FiT rate for systems up to 4kW, 4-10kW, 10-100kW and then 100kW-5MW. I called the DECC to confirm the 50kW figure, and to ask where it had come from. I was told that this was the ‘marker in the sand’ for large-scale solar. This means then, that small- to medium-scale PV developers should now begin to worry, as the loosely worded statement issued by Government means that these installations could also now be under threat.

Energy Source

Scale

Feed-in tariff (pence/kWh)

Duration (years)

Solar PV

≤4kW new

36.1

25

Solar PV

≤4kW retrofit

41.3

25

Solar PV

>4-10kW

36.1

25

Solar PV

>10-100kW

31.4

25

Solar PV

>100kW-5MW

29.3

25

Solar PV

Standalone

29.3

25

Jeremy Leggett, Executive Chairman at Solarcentury, said: “At no point in the period running up to the CSR and its aftermath has there been any hint from DECC that they had concerns about solar uptake in the built environment at any scale. Indeed, quite the reverse. But today, any PV above 50kWp has been unfairly and unjustifiably pushed into an immediate review with an uncertain timescale. On what basis? What is their evidence base for doing so? They don't have one. What is the justification for rushing through an urgent review of PV greater than 50kW when all other technologies up to 5MW are spared that process?  We are not given any [information] beyond reports of a few planning permissions for solar parks greater than 1MW.”

Gaynor Hartnell at the REA said, “Developers of PV installations upwards of 50kW will be left hanging in the air. Bands up to 4kW can be more confident tariff levels will remain unchanged until April next year – but developers of schemes from 10kW to 50kW in particular will be wondering how the announcement applies to them. DECC expresses concern about field arrays but it is fast-tracking far more than the stand-alone field arrays.  In our view this has escalated the uncertainty.”

Furthermore, I am rather incensed by the mention yet again of large, utility-scale installations “soaking up the subsidy payments set aside for homeowners,” which was not just reiterated by Huhne yesterday, but was also reported in three of the mainstream newspapers. As I have previously retorted, this is a ridiculous notion – why create a feed-in tariff rate for systems up to 5MW unless you’re expecting ground-mounted arrays? I don’t see mile-wide roofs knocking about all over the UK, do you?

Now, some of you may now be saying, “Well, they didn’t ask for this system, they inherited it. It can’t be the Coalition Government’s fault that the system ‘failed to anticipate large field-based arrays,’ as it wasn’t their policy.”

But actually, the law passed through Parliament, and would therefore have been voted on by all members, including the Conservatives and the Liberal Democrats. In fact, the Tories said during the election campaign that they would scrap the current Renewable Obligation (RO) and use feed-in tariffs to develop renewable energy. The British coalition agreement also stipulated that the two parties will "seek to increase the target for energy from renewable sources" over that of the previous Labour Government. There was no sign of there being a problem with the policy, or that the policy “failed to anticipate” anything. It wasn’t until a few months back that the problem with large-scale solar was even articulated.

As I have quite clearly confirmed in the above points, the Government is yet again demonstrating its naïve attitude toward solar power, and the way it works. Not only is it announcing ridiculous amendments to the FiT policy over and over again, it is articulating (or not) them in such a way that no one really knows exactly what’s going on.

2. Deep impact

The Government’s most recent move only confirms my previous suspicion that it is not interested in cutting carbon emissions by using solar energy to drive the generation of green energy. Instead, the Government is shining an anti-PV spotlight on itself by putting a stop to the very thing that is driving this country toward its 2020 emissions targets.

As outlined in the graph above created by the DECC, the Government clearly views solar as too expensive, yet it fails to understand that it is stamping on the very thing that brings cost down – large-scale installations. As explained in my blog, A case for large-scale solar power in the UK,by installing on a large scale as opposed to several small-scale systems, the costs are significantly cut. This can be achieved in the following ways:

Purchasing: bulk buying of materials through long-term contracts
Managerial: increasing the specialization of managers
Financial: obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments
Marketing: spreading the cost of advertising over a greater range of output in media markets
Technology: taking advantage of returns to scale in the production function.

By implementing solar on a large scale across Europe, the cost of PV has come down so much that FiT rates have to be reduced in order to keep the system flowing smoothly. Why can’t we learn from successful models so our FiT can be cut for the right reasons, not because…well we don’t really know why the UK’s cuts are planned.

By ignoring the way it has worked in Europe, the UK’s solar industry suffers tremendously.

By making solar on a large scale completely commercially unviable, the Government puts a stop to new green job creation. “It [the announcement] has also created significant and real job uncertainty in one of the few industries to create thousands of new jobs in the UK in the past ten months. Hiring plans throughout the UK solar sector will now be placed on hold meaning more unemployment and less tax take from this industry at a time when Ministers are struggling to work out where the new private sector jobs are going to come from. And again, we have no explanation for the Government doing so,” explains Leggett.

This will significantly affect the progress that has been made in large-scale development locations, Cornwall in particular. Tim German, Renewable Energy & Partnerships Manager at Cornwall Council, said: As yet, not one large-scale (i.e. 1MW- 5MW) solar park has been built and operational. To access the FiT they have to be operational by being plugged into the grid and generating electricity. Therefore: a decision to bring the cap down from 5MW to 50kW is premature as the ‘problem’ isn’t actually in evidence yet. Why do this when as yet there isn’t a problem?”

Why indeed.

3. Warning: develop at own risk

This is all terribly bad news for the UK solar industry, not just because we have successfully scared the socks off anyone thinking about moving into the country to install, but also because we have wasted hundreds of companies’ time by making them sign up for MCS accreditation as well as convincing them that it’s safe to invest and then admitting that they won’t actually be able to construct their planned projects.

My advice to all solar developers out there (indeed, anyone planning on installing a system larger than 50kW) would be to act now. It seems almost certain that cuts will take place, and if they do, they could happen as soon as July this year.

This blog originally appeared on the Solar Power Portal.

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