Today, DECC has released its response to the Review of the Feed-In Tariff Scheme. The headline points to be taken from DECC’s response include:

  1. Revised Tariffs - The revised tariffs and bandings for each technology are as set out in the table below:

Click here to view table.

  1. Deployment caps – An overall deployment cap of £100million will be available for new projects applying under the FIT scheme on or after 15 January 2016, with sub-divided quarterly caps to be allocated across the different technologies and capacity bandings from 8 February 2016. The first cap period will run from 8 February 2016 to 31 March 2016. Deployment under the caps will be monitored based on total installed capacity of installations in the MCS database and Ofgem ROO-FIT accreditation applications, as well as preliminary accreditation.

A queuing system for applicants who miss out on a cap will be created, with qualification under a cap to be determined by the time and date (to the second) of an installation’s MCS Certificate or ROO-FIT application.

A table setting out the maximum deployment caps per quarter for each technology and banding, and the estimated number of installations at maximum deployment can be found on page 14 and 15 of this link.

Any unused capacity for a particular technology and band for one quarter will be added on to the next quarter, and a biannual budget reconciliation for any underspend is to be undertaken with a redistribution as deployment cap ‘top ups’ to be applied in line with policy priorities.

  1. Degression - Default degression will continue to be applied to tariffs, with an additional 10% contingent degression to be applied to any technology/ banding capacity cap reached.
  2. Pre-accreditation - Pre-accreditation is to be re-introduced from 8 February 2016 for solar and wind projects over 50kW and for all anaerobic digestion and hydro projects. Validity periods for pre-accreditation will be six months for solar PV; one year for wind; and two years for hydro and anaerobic digestion. The additional six month validity period for community energy projects will also be re-introduced. However, the pre-registration tariff guarantee for eligible community projects will not be re-introduced at this time.
  3. Project Extensions – A generation tariff will not be available for extensions to installations which commission on or after 15 January 2016.
  4. FIT Scheme Pause - The Government intends to pause the FIT scheme for 4 weeks, from 15 January 2016 to 8 February 2016, following which the new tariff and deployment caps will be in place. No new installations will be accredited during the pause other than projects with pre-accreditation validity periods running during the FIT Scheme Pause. Installations which commission and apply for accreditation during the FIT Scheme Pause will be in the queue when the FIT scheme re-opens on 8 February 2016.

No changes are currently to be made to the export tariff, tariff indexation, smart meters or sustainability criteria for anaerobic digestion. However, DECC has stated that it intends to launch a separate consultation regarding tariffs and degression for anaerobic digestion and micro-combined heat and power technologies, as well as sustainability criteria for anaerobic digestion plant, in early 2016.

Conclusions

The Government’s announcement that solar PV subsidies will be cut by 64% rather than the previous proposal of an 87% reduction is positive news for the industry and shows that the Government has listened to the responses of industry participants. However, with more accelerated tariff degression and deployment caps for new projects to be introduced, it is clear that the industry will need to look at new models to develop solar PV that are not as reliant on Government subsidies in the future, including those which bring down key costs of the EPC and financing.

We are working with clients who are re-thinking their approach to risk and the option to pay others to take such risk when in fact the project sponsor is better placed to understand and manage that risk. Business models which focus on quality control can also reduce financing and other costs. This is how the solar PV industry is developing globally.

This is further echoed by industry expert BPVA Chairman Reza Shaybani who stated:

"The announcements made today shows that due to our hard lobbying the Government has listened to the sensible arguments, facts and figures we have put forward as an industry.”