Solar bears brunt of UK clampdown on renewables spending

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The UK’s main support mechanisms for large-scale and rooftop solar look in doubt following the publication of two government consultations this morning.

The renewable obligation (RO) scheme for projects under 5MW now faces closure in April 2016, a year earlier than expected, potentially threatening to choke off activity in the large-scale segment after that date.

And a Department of Energy and Climate Change consultation document also sets out measures to control uptake of the feed-in tariff for smaller, primarily rooftop solar installations, through a clampdown on a pre-accreditation provision that guarantees projects above 50kW a certain FiT level ahead of their being commissioned.

DECC also said a full review of the UK’s FiT later this year would include a “full package of cost control measures”, implying it could be in line for further cuts, though no details on this have yet been outlined.

The proposed measures are a response to concerns of a budgetary overspend within the so-called Levy Control Framework (LCF), the mechanism by which the UK’s renewable energy support programmes is funded. Ultimately this cost would be passed on to bill payers, and Amber Rudd, the UK’s energy and climate secretary, said the government was acting to prevent this happening.

“My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way,” she said.

“Our support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment.”

The biggest immediate impact of today’s measures will be on the large-scale sector. Access to the RO to projects above 5MW has been closed since April this year, but the government’s intention had been to keep it open for sub-5MW projects until April 2017.

Another important element of DECC’s consultation is the scrapping of the so-called “grandfathering” provision for projects accredited from today.

Grandfathered rates for solar PV had previously guaranteed the same level of renewable obligation certificates for the lifetime of a project and have been instrumental in instilling investor confidence in the sector. However, DECC claims that the move is necessary in order to “avoid potential overcompensation” in the inevitable developer rush to connect solar projects before the scheme is closed.

DECC’s RO proposals will cast doubts over the future of the UK’s booming large-scale PV, which has helped it to become Europe’s fastest growing market in the past two years.

The auction-based Contracts for Difference programme, brought in to replace the RO, has so far failed to ignite, with the first round earlier this year awarding contracts to only a handful of solar projects. Yesterday Rudd told a parliamentary select committee hearing that no date had yet been set for the second round of the CfD process, again because of the apparent LCF overspend.

Since taking office following the surprise Conservative win in the May general election, Rudd has spoken of her desire to see a “solar revolution” in the UK.

However, she later said that rather than more large-scale PV, the government instead wanted more solar on residential and other rooftops.

But UK trade body the Solar Trade Association said the proposals would impact on big rooftop projects as well as open-field projects.

“This is damaging for big solar rooftops as well as solar farms, both very cost-effective ways of generating solar power. This contrasts with repeated commitments from Government to boost the commercial solar rooftop market,” said STA head of external affairs, Leonie Greene.

“The possible removal going forwards of the guarantee on a set level of support throughout a project’s lifetime once built is a real blow to investor confidence.

“We recognise that Government wants to shift the emphasis to larger solar rooftops, but we have explained to the Department that these are just 5% of the UK market. More work is needed urgently to unlock larger solar roofs. There is a danger if Government pulls the rug on the solar farm industry too early, the market will have nowhere to go. This could be further compounded by changes to the Contracts for Difference auctions. What we need is a bridging strategy and we are very keen to work with DECC to achieve that.

“We also regret this move because solar farms are close to competitiveness with new gas generation and they account for a very small proportion of expenditure on the Renewables Obligation. We're hearing a lot of big figures from Government, but they should know it is just a few quid more on energy bills to deliver nothing less than a solar power revolution in the UK. We're very close, but we're not there yet. We think the British public would support that. Support for solar under the Renewables Obligation currently costs just £3 per year on each household bill, and solar only makes up only 6% of the Renewables Obligation budget.”

Additional reporting by Peter Bennett.

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