The UK Department of Energy and Climate Change (DECC) is proposing to cut the feed-in tariff (FiT) rates for solar PV installations by as much as 87%.

A review of support schemes for renewable energy across the board had been long-awaited in Britain. The government office is proposing deep cuts to support for all scales of PV system from 1 January 2016.

Solar Power Portal, the UK-focused site from PV Tech’s publisher Solar Media, reported this morning that DECC is also looking to enforce default degressions each quarter which would see FiT support for some scales of solar end on 1 January 2019. DECC will still implement a contingent degression mechanism that could degress tariff rates by a further 10% depending on deployment.

DECC is also proposing to change the indexation of the feed-in tariff scheme, moving it away from retail price index (RPI) to consumer price index (CPI). The department argues that CPI is a more appropriate way of compensating investors for inflation.

Under the new rates, PV systems of 10kW capacity or below would earn just £0.0163 per kilowatt-hour for generation. Large-scale systems of between 1MW and 5MW would be set at £0.0103 per kWh. Systems over 5MW are no longer supported by the FiT and instead must participate in the contracts for difference (CfD scheme) which is akin to a competitive tender process.

However, the second round of CfD allocations have been postponed indefinitely after an overspend was discovered in the Levy Control Framework (LCF), which is the government mechanism to control the cost of renewable energy subsidies, following last year’s inaugural round.

Medium and commercial scale solar will fare slightly better, with generation FiTs ranging from £0.0369/kWh for a 10-50kW system and £0.0228 for a 250-1000kW system.

Impact assessment

The department also produced an impact assessment report, which admits that the proposed changes to feed-in tariff rates for small-scale renewables would mean the UK installing over 6GW less in new renewable generation capacity by 2020/21, mostly solar.

DECC examined the likely effects its proposed drastic cuts to the tariff rate would have on figures such as deployment, the number of installations and its impact on the environment.  

The headline figure contained within the assessment is that the government’s proposals would wipe around 6.1GW from the UK’s renewables generation capacity by 2020/2021, with 890,000 fewer households opting to install renewable energy technologies over the next five years.

That lack of PV deployment in the UK would have a substantial impact on carbon emission levels as other energy generation methods are used. Mid-range estimates for this state that just under 1 million more tonnes of CO2 will be emitted each year, a figure which will cost the government around £3.44 million each year under European Union rules. This cost increases to around £610 million by 2055/56.

DECC’s reasoning behind the review has always been to prevent added costs being levied onto customers through higher energy bills, but DECC’s own impact assessment states that the average household would still save less than 1% - equivalent to around £6 per year – through the changes.

Even large energy intensive industrial businesses would save just 1.4% on their energy bills using DECC’s mid-range estimates, with total savings to the Levy Control Framework estimated to be around £450 million.

DECC also warned of substantial risks to employment – termed as a “rebalancing of jobs in the sector” – although claimed it was not able to quantify the impact and has requested input from the sector through the consultation process.

Industry reaction: 'hugely damaging'

The proposals were widely condemned by the UK industry and environmental groups, as Solar Power Portal found today. Just last week a coalition of 100 organisations had written to UK Prime Minister David Cameron urging him to support small-scale renewables ahead of a forthcoming comprehensive review of the country’s feed-in tariff regime. 

Finlay Colville, analyst, head of market intelligence at Solar Intelligence:

The industry had been bracing itself for DECC's proposed FiT changes, with most anticipating the worse-case scenario from a government that appears to be seeking to distance itself from the solar industry. If bad news comes in three's, then perhaps the FiT review simply concludes DECC's ROC/FiT double-whammy. With ground-mount being left to cling onto CfD's, it is now becoming very hard to see any silver lining to DECC's current anti-solar crusade that would see any meaningful capacity allocated to the next auction round.”

Mike Landy, head of policy, the Solar Trade Association:

The proposals put forward by the Government today, which will now undergo a period of consultation, would be hugely damaging for the UK solar industry and we are now consulting quickly with our member companies as to how to respond.

We will provide a detailed response shortly, once we have considered the proposals in more detail. However, we regret that proposals to suddenly cut Tariffs combined with the threat of closure of the scheme next January will spark a massive market rush. This is the antithesis of a sensible policy for achieving better public value for money while safeguarding the British solar industry.”

Alasdair Cameron, energy campaigner, Friends of the Earth:

From California to China, the world is reaping the benefits of a solar revolution, yet incredibly in the UK David Cameron is actually trying to shut rooftop solar down.

These absurd solar cuts will send UK energy policy massively in the wrong direction and prevent almost a million homes, schools and hospitals from plugging in to clean, renewable energy.

Of course the feed-in tariff should fall as solar becomes cheaper, but the government clearly plans to remove support entirely. This is politically-motivated, and will take away power from people and hand it back to big energy firms.

Instead of championing fossil fuels, the government should focus on developing the UK’s huge renewable energy potential. Policies like this will further undermine David Cameron’s credibility on climate change. World leaders meeting in Paris later this year will have every right to call him a hypocrite.

Additional reporting by Liam Stoker and Andy Colthorpe.

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