25 May 2012

DECC announces new solar pv FITs

Following the latest phase of consultation, the Department of Energy and Climate Change (DECC) has announced the new solar pv Feed-in Tariff rates.

The new rate for 4kW systems will be set at 16p/kWh, aligned with existing installation figures, in a bid to re-establish consumer confidence and to generate attractive return on investing as initially intended.

As expected, the DECC has also confirmed that the new FiT rates will now apply from August 1, to encourage further demand, with the original deadline set as July 1. A consequence of declining installation prices – in excess of 50 percent reductions over the last 2 years – as well as decreased demand and reduced installations from approximately 71MW to 17MW each month, the delays were welcomed across the solar industry.

The DECC expects that the new rates will boost investment in the solar market, aiming for installation figures to total 800MW over the next 18 months, as well as up to 1,000MWp each year to 2015, and a total of 22GW for 2020, despite a reduction from the original rates. In addition, larger schemes under ROCs could generate a further 300-600MWp of installations by April 2013.

Greg Barker, Minister of State, also announced additional changes to the current FiT scheme for solar pv, including:

  • A less complex degression management model, including reduced quarterly degressions
  • Three different bands for uptake: domestic (0-10kW); small commercial (10-50kW); and large commercial (above 50kW and standalone installations). Reductions will be established within each bands and applied on a quarterly basis
  • New FiT rates to be paid over 20 years
  • Return on investment is expected to be over 6 percent for conventional schemes, with up to 8 percent for the larger bands
  • Export tariffs will increase from 3.1p to 4.5p, to boost large scale solar pv investor income
  • Organisations with more than 25 solar pv installations will now receive 90 percent of the standard applicable tariff.

Mr Barker said:

“I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.”

Meanwhile, the DECC has also published the long anticipated draft energy bill, which includes the Electricity Market Reforms (EMR), aimed at helping the UK to decrease reliance on conventional fuel and work towards a low carbon economy. The EMR posed keeping the lights on, reducing consumer energy bills, and generating clean electricity to address climate change as the most significant issues it aims to tackle. The reforms are expected to provide investors with transparency, longevity and certainty, in the hope to attract around £110bn investment to the UK.