A solar sector of substance: what does the future hold for PV in the UK?

The UK government announced its plans to concentrate on renewable energy and the policies fit for this move in July this year, what follows this announcement, we are all eager to find out. There were many lengthy documents outlining separate aspects of the plans, yet all seem to be pointing towards one thing: the fact that nothing is yet set in stone.

PV-Tech reported on the UK’s renewable energy ambitions back in 2008, when Miliband announced among other solar plans, a feed-in tariff (FiT) rate to be introduced in the UK for suppliers of renewable energy who were feeding energy back into the grid. This bill was given a time frame of one year to pass; yet once the time came to provide details of the bill, a slightly rushed government had to churn out something to show that it was at least thinking about it.

During this three month consultation period all details outlined in all of the reports published on the 15th July 2009 could be changed, so one has to wonder why they would publish this report in so much detail? This move could be considered rather a brave one, as the government is subjecting itself to criticism of plans that are not definitely going to be put into action. Nevertheless, it is worthwhile reporting on what they have said, just in case any of it does materialize.

The FiT being considered is being labeled the “Clean Energy Cash-back Scheme,” most likely so that people fully understand what its purpose is. The introduction of an FiT rate was a decision by the UK government to simplify the incentives surrounding using renewable energy sources (RES). The current system in place for generating renewable energy is the Renewable Obligation (RO); this is a very lengthy and complex system designed for energy professionals who generate electricity on a large scale (50kW+) and was not deemed suitable for residential installations.

The cash-back scheme (if implemented) will benefit businesses and communities using renewable energy sources and will begin in April 2010. Plans state that a building with well-placed solar panels could receive £800 and bill savings of £140 a year. This scheme, (if it goes ahead), will be the only option available for those with installations of up to 50kW, while larger installations of 50kW-5MW will get the choice of either the FiT or the RO scheme.

There are two likely FiT structures being discussed within the three-month consultation period, the preferred option being the ‘Generation Tariff’. This tariff will have a set rate per kWh of electricity produced, whether it is fed back into the grid or not, which will be paid dependant on system size and type over a period of 15-25 years. This period is outlined while being conscious of the fact that some systems’ lifetime is shorter than this, therefore this is one aspect that we can expect to be reviewed.

The other, less likely tariff structure is the ‘Export Tariff,’ this pays only for exported electricity. This idea is not as popular as the generation tariff as the owner of a system only receives payment for energy fed back into the grid. These initial proposals are based on a tariff rate of 36.5p/Kwh for certain solar photovoltaic systems to 4.5p/Kwh for the most efficient biomass, wind and hydroelectric systems. A more detailed overview based on system size and type follows below. 

 The above tariff rates are estimated figures for the first year beginning April 2010.

Designed to be introduced in the same year as the FiT the government will require every home to install a smart meter by the end of 2020. The government hopes this will enable UK residents to understand energy use, maximise the opportunity for energy saving and allow energy companies to offer better services.

The level of return for this investment can be quite modest, for example between 5-7%.  Critics have responded to this amount as far too low of an incentive for UK residents to actually take-up RES. The Renewable Energy Association has commented on the plans saying that the low investment return is “worrying”. Other criticisms include the issue of taxation on the FiT rate, as while it is not mentioned in the document, it is likely this will appear after the three-month consultation period and of course there is the problem of inflation and how this will in turn impact the proposed system.

Other initial feed-back from those who have read the report has been fairly positive, yet there does seem to be some of the same opinion that the government subjected itself to potential embarrassment by outlining plans which could all change by the October 15 deadline.