New cuts proposed for support for small-scale renewables

Britain’s renewables industry is ‘reeling’ at government proposals to review and reduce support under the Feed-in Tariff (FiT) scheme for small-scale renewable energy installations. The government published its consultation document on the scheduled review of the FiT scheme late in August, with a deadline for responses of 23 October – it suggests some drastic reductions in payment levels.

For example, for domestic-scale solar photovoltaic schemes up to 10 kW in size, the current payment rate of 11 or 12 p/kWh generated would be reduced to 1.63 p/kWh. More modest, but still sizeable, cuts are proposed to PV systems right up to 5 MW in size, and tariffs for domestic-scale systems would be removed altogether by 2019.

The FiT scheme supports thousands of householders, farm operators and rural businesses to generate some of their own energy needs on-site. Some 10% of UK farms are reported to use local wind power to reduce their energy bills.

The Solar Trade Association (STA), which has been talking with officials and ministers over the last few months about how the FiT framework could be reformed to provide better value for money and target parity with fossil energy by around 2020, is dismayed at the now likely direction of change. The STA estimates that it would cost just another £1.70 per year on energy bills between now and 2020 to deliver a million more solar homes, and grid parity.

Mike Landy, Head of Policy at the Solar Trade Association commented: ‘We don’t agree with these self-defeating proposals and will be urging DECC to take up our alternative. A sudden cut, combined with the threat of scheme closure is a particularly bad idea – it will create a huge boom and bust that is not only very damaging to solar businesses and jobs but does nothing to help budget constraints.’

Wind energy trade association RenewableUK’s Deputy Chief Executive, Maf Smith, added: ‘The small and medium wind sectors are at one with government in their desire to cut carbon at lowest cost to the consumer. But they can’t do this when government makes sudden and damaging changes which undermine investment. What we needed in this review was a clear vision for how we get to a point where cost effective, small-scale renewables are commonplace, with all homes and businesses able to be part of a productive, vibrant low carbon economy. This review is not about how we build that prosperous future but simply about short term politics and accounting.’

This latest and previously-announced moves to reduce support for renewables is damaging investment prospects for Britain, according to EY’s latest Renewable Energy Country Attractiveness Index. Following a ‘plethora of policy announcements in the three months to August withdrawing support for renewable energy,’ the UK has for the first time lost its top 10 spot in EY’s league table of the 40 most attractive renewable energy markets for investors, slipping to 11th place. This year alone, 23 large-scale projects, representing around 2.7 GW of electricity generating capacity have been publicly abandoned, putting a question mark over the long-term future for the UK’s renewable sector, says EY

Ben Warren, Energy Corporate Finance Leader at EY said: ‘Few in the renewables sector would disagree that falling costs mean many renewables projects, particularly onshore wind and solar PV, will be cost-competitive and subsidy-free within the next three to five years. However, by prematurely withdrawing support, the government risks stalling or killing projects that would otherwise maintain the momentum to get the market to that critical point.’

Warren continued: ‘The UK renewables sector is at a crossroads. It can continue to fight this policy tinkering, or see this as an opportunity to throw off the shackles of policy dependency and establish itself at the forefront of unsubsidised renewables in Europe. The latter won’t be easy, but it may well be worth taking the risk.’