The U.K. Government has set the new solar PV tariffs. Representing a partial victory, cuts will not be severe as anticipated – 64% instead of 87% for residential – however, fears are nearly 19,000 jobs could still be lost. Quarterly caps have also been imposed which, says STA, could be damaging. Solar can still be a “reasonable” investment, it concludes. The new rates will come into effect on February 8. Despite the limited success, harsh criticism has been aimed at the government, particularly in light of its decision to end ROCs and grandfathering.
Following months of consultation and strong lobbying on the part of the solar industry, the U.K. Department of Climate Change (DECC) has today released the new FIT rates for renewables.
Hailed a partial victory by industry, the cuts will not be as severe as originally planned (see table below), although the new quarterly cap introduced could prove damaging, says the Solar trade association (STA). The cuts will come into effect on February 8, 2016, with the deadline for projects to receive the current higher tariffs now January 15. A total of £100 million has been made available for FITs.
Newly introduced are the quarterly caps on installation amounts (see following table). STA says there are “serious concerns” over the cost control mechanism. Specifically, it believes it could lead to “damaging stop-starts in the market.”
“The Government has put maximum caps on the total amount of solar it wants to see installed in every quarter. This could be very damaging, although they do appear to have taken on board requests for unused capacity to be recycled from one quarter to another and a queuing system for projects that don’t get in on time,” it comments in a statement released.
The two quarterly rates of degression will remain: default and contingent. They will begin in Q1 and, going by the default degression, end in Q1 2019, at 3.55 p/kWh for installations <10 kW, 3.78 for those between 10 and 50 kW, and 1.96/kWh for systems between 50 and 250 kW.
In a welcome move, pre-accreditation has been re-introduced. Back in September, the government confirmed that it would press ahead with its proposal to end the FIT pre-accreditation processes for larger rooftop and small solar farms on October 1. Today’s announcement has seen this re-enacted for all solar systems above 50 kW in size. This, says STA, “will give businesses and other bigger rooftops more certainty when investing in solar.”
Ground mount support pulled
In another blow to the already reeling U.K. solar industry, the government has confirmed the Renewables Obligation will be closed to all solar PV projects from April 1, 2016. While the plan is to gradually replace it with the Contracts for Difference auction system, no decision has been made, comments STA. Grandfathering has also been pulled for all projects that do not meet the July cutoff date. Consequently, with a FIT of just 0.87p/kWh, there is very limited support for projects over 1 MW.
“Removing the grandfathering guarantee makes no sense for solar – it’s the thin end of the wedge,” states STA CEO, Paul Barwell. “If you invest £1million of capital into a solar project today, in 20 years’ time you have still invested £1million – it is a sunk cost. You cannot have the level of support changing over the lifetime of a project as investors won’t take the risk.”
Seb Berry, head of public affairs at Solarcentury added, “… the FIT outcome [cannot] be divorced from the double whammy of the early closure of the RO and an end to grandfathering for solar projects under the RO, the only renewables technology to be hit with that retrospective change.”
However, commenting on the ground-mount sector, Finlay Coleville, head of market intelligence at Solar Media Ltd tells pv magazine that it actually appears to have fared much better than anticipated, since the changes to ROCs are “nowhere near as bad as thought,” with the new proposals give existing projects that qualify an extra 12 months, albeit it at lower levels.
“The large-scale ground-mount sector appears to have favored much better however, albeit with a raft of legal caveats that will have the lawyers sweating over for the next few weeks. But potentially the scope for build-out to 31 March 2017 at manageable levels does appear an option, but still requiring planning applications submitted before 23 July 2015 and subject to some subtle changes for Scotland that are yet to be fully assessed,” he says.
Reasonable investment potential
Despite the cuts still being deep, there is hope that the U.K. solar sector, which has grown to become the leading European solar market, still represents a “reasonable” investment option. In its documentation, released today, the government calculates a target rate of return of 4.8% on solar PV installs.
STA’s Barwell, comments, “The new tariff levels are challenging, but solar power will still remain a great investment for forward-thinking home owners who want to protect themselves from volatile energy prices and do their bit to reduce global carbon emissions.”
Coleville adds, “In many respects, the proposed changes from DECC are nowhere near as bad as many in the UK had feared. The feed-in tariff is seeing heavy cuts and with a quarterly deployment cap. This should allow a subset of residential and small commercial installers to keep going, but with changes to their cost structures.”
Despite this glimmer of hope, in its impact assessment, the government has estimated that between 9,700 and 18,700 solar jobs could be lost as a result of the changes.
In October, STA estimated that 27,000 of the 35,000 jobs in the U.K. solar industry and its related supply chain could be lost, if the cuts came into play. A survey by STA of just 10% of the British solar sector revealed at the end of November that as many as 6,500 positions could have already been lost.
Harsh criticism has been aimed at the government for its lack of overall support for the solar industry, particularly in light of the recent climate talks in Paris, which have been hailed by many as a turning point for renewable support.
“Today’s DECC announcements on solar FITs and confirmation of the early closure of the Renewables Obligation (RO), suggest that Paris has changed nothing,” states Solarcentury’s Berry. “Indeed worse than that, the Government is spinning a projected decrease in the annual market for solar to 2020 as utterly consistent with COP21 and the now urgent need to accelerate our transition to a zero carbon economy.
“The four week ‘pause’ to the scheme from 15 January is particularly unwelcome, the total opposite of the ‘transparency, longevity, certainty’ that we were once promised by a Tory energy Minister.”
Paul Barwell adds, “… in a world that has just committed to strengthened climate action in Paris and which sees solar as the future, the UK Government needs to get behind the British solar industry. Allocating only around 1% of its clean power budget to new solar is too little, particularly when solar is now so cost-effective. Poor ambition for solar risks missing out on not only our renewable energy targets in the UK, but on the world’s greatest economic opportunity too.”
Taking a more positive approach, head of policy and external affairs at the Renewable Energy Association, James Court, said, “The government have taken on board many of the common-sense suggestions from the REA and wider industry, such as bringing back pre-accreditation for long lead schemes, reallocating budgets from under deployed technologies and increasing deployment caps for solar.
“The tariffs are still very challenging and whilst the changes will help save some in the industry it remains that many will be exiting. But this is an improvement, and may still provide the base to get to post-subsidy.”
Source: PV Magazine. Reproduced with permission.