Government clarifies solar feed-in tariff rate as industry uncertainty
DECC confirms tariff rate will not fall below 21p for installations completed between 12 December 2011 and 31 March 2012
The government has confirmed the current feed-in tariff rate for solar installations with less than 4kW capacity will not fall below the proposed 21p per kWh for all systems completed between the December 12 last year and March 31 this year.
BusinessGreen understands that Department of Energy and Climate Change (DECC) officials had signalled to industry representatives that the feed-in tariff rate for installations completed after the December 12 date proposed as the cut-off point for the previous rate of 43p per kWh would not be cut below the 21p per kWh rate set out in the government’s consultation exercise.
The reassurance was significant as it meant solar firms could assume that regardless of the outcome of the current legal battle over whether the government’s plan to effectively cut incentives before the end of the consultation period is illegal, the feed-in tariff rate for the current period would not fall below 21p.
It implied that if the government won its appeal against a court ruling branding its proposals as “unlawful” the feed-in tariff incentive for installations carried out after December 12 would probably be cut to 21p, while if it lost the case the incentives would revert to the previous rate of 43p per kWh.
However, for several weeks the department failed to offer a public confirmation that cuts would not go deeper than the proposed 21p rate for the period between December 12 2011 and March 31 this year, fuelling concerns among some solar firms that deeper cuts could potentially be imposed.
Responding to a question from BusinessGreen, a spokeswoman for DECC said it was safe for solar firms to assume the current rate would not fall below 21p per kWh. “The tariff rates for PV installations will not fall below the proposed levels (e.g. 21p for the less than or equal to 4kW band) for systems with an eligibility date between 12th December 2011 and 31st March 2012,” she said in an emailed response.
The news was welcomed by one industry insider who said it would provide some much-needed certainty to solar firms currently attempting to promote installations that remain economically viable at the proposed new incentive rate of 21p per kWh.
However, industry trade bodies remain concerned that no such reassurances have been offered for installations with over 4kW of capacity.
Moreover, clarification on the longer term future of the feed-in tariff scheme could still be several weeks away, with speculation mounting that the three judges considering the government’s application for an appeal hearing are unlikely to deliver a decision this week.
Speaking at last week’s initial appeal hearing, the judges said that while they were aware that it would be preferable for a decision to be reached as quickly as possible it would be “highly optimistic” to think such a complex case could be considered within a week.
Solar industry insiders are also increasingly concerned that if the government loses the case it may respond by cutting incentives in the future to just 9p per kWh.
Ministers have repeatedly maintained that if the feed-in tariff is returned to the previous rate of 43p per kWh it will trigger a surge in installations that could break the budget for the scheme.
BusinessGreen has obtained an update from the Solar Trade Association and the Renewable Energy Association sent to its members following a meeting between the trade groups and DECC officials, which reveals the department is now considering cutting feed-in tariffs post April 2012 to 9p per kWh in an attempt to stop the scheme over-spending.
“Reducing the tariff for all PV systems installed post 1st April 2012 to 9p kWh (equivalent to 2ROCs) remains a possibility,” the update reads. “DECC officials were keen to stress that this is not their preferred outcome, but all options remain under consideration. However, we are concerned as we understand DECC came very close to this two months ago, but this was fought off by the Minister. The legal process may have implications as to whether this outcome might be avoided again.”
However, others within the industry have argued that it is misleading to suggest the prospect of deeper cuts to incentives are solely the result of the on-going court case, arguing that with Climate Change Minister Greg Barker admitting the feed-in tariff scheme has already overspent for the current year the only way to maintain reasonable levels of incentives in the medium term is to raise the scheme’s spending cap, regardless of the outcome of the court case.
Meanwhile, Friends of the Earth’s Donna Hume reiterated the campaign group’s call for the government to table legislation immediately to ensure it can cut feed-in tariff incentives as quickly as possible if it does lose the appeal.
The latest developments come as figures obtained in response to a parliamentary question from Shadow Energy and Climate Change Secretary Caroline Flint show that over 100,000 solar installations were completed during a six-week gold rush period between the announcement of the proposed cuts to incentives last October and the planned cut-off date of December 12.
The surge in installations means that almost as many installations were completed over the six-week period as were installed over the previous 19 months of the scheme.
The figures support government claims that urgent cuts to incentives are required to stop the feed-in tariff scheme exceeding its budget.
However, they will also fuel criticism of the government’s handling of the scheme, with industry insiders accusing ministers of overseeing a boom and bust period that has resulted in the rate of installations “falling off a cliff” since December 12.