UK government says 4% returns are plenty for solar

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The UK government’s response to a petition calling for dramatic feed-in tariff cut proposals to be reversed has been criticised after it insisted expected returns of 4% would be “appropriate” for the industry to operate.

The Department for Energy and Climate Change was forced into an official response after the petition attracted more than 10,000 signatures less than a week after it was launched. The response lays bare government thinking behind a proposed 87% reduction to the small-scale feed-in tariff.

DECC stated that the new tariff – just 1.63p/kWh for installations up to 10kW in size – has been designed to give investors a return on their investment of between four and 9%. It also argued that once savings on energy bills and the export tariff were taken into consideration, the overall reduction in revenue amounted to 40%; a figure which the department believes “still provides an appropriate return on investment”.

However Paul Barwell, chief executive at the Solar Trade Association, said returns of 4% across rooftops would be “simply too low a hurdle rate” for domestic homeowners and commercial customers to tempt them into installing the technology.

“With the way DECC have modelled these assumptions, 4% is a best case scenario using very high yields of 990kWh/kWp with no degradation, high retail electricity price of 17.4p and over a 30-year period.

“The intention is to dramatically curtail growth, and with an 85% drop in tariffs, an 85% drop in volume caps, that leaves a 98% reduction in the proposed new budget – it is in effect a closing down sale.

“[The] bottom line is we cannot expect to entice homeowners and customers to put their cash into solar at these proposed new levels, and we have made this point loud and clear in meetings with DECC,” Barwell said.

The government also extolled how the feed-in tariff had been successful in meeting deployment projections and said the cost control measures would not mean solar PV missing its 2020 deployment range.

“Even with the actions proposed in the FIT Review we are on track to deliver at least 30% of our electricity from renewable sources by 2020. At the end of 2013, our share of electricity generation from renewable energy was 14.9%. In 2014 this figure rose to 19.2%, and a record of 22.3% was recorded in the first quarter of 2015,” the government said.

DECC does however go on to state that the proposals are merely “part of the consultation process” and that it welcomed further evidence from industry stakeholders based on its assumptions, echoing calls energy secretary Amber Rudd and energy minister Andrea Leadsom made during an oral and topical questions session in parliament last week.

Barwell said that engagement with “rational alternatives” to the feed-in tariff must be a priority, but concluded that they can only work if businesses can continue to operate and “see a light at the end of the tunnel”.

The official petition continues to collect signatures and has now gathered the support of more than 20,000 people. Petitions run for six months with the aim of obtaining 100,000 signatures, after which it will be considered for debate in parliament.

“We need even more people to sign this petition in order to get it onto the agenda at parliament, and so we encourage everyone to share it with their networks to maximise the number of signatures,” Barwell added.

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