Scope of review and key issues
With over 21,000 installations registered, many already view the feed-in tariffs (FIT) scheme for small-scale, low-carbon electricity generation as a success. However, the government is concerned at the high uptake by so-called 'super-size' solar installations and wants to find FIT savings in 2014 and 2015. Therefore, on February 7 2011 the secretary of state for energy and climate change announced plans for the first review of the scheme.
Scope of review and key issues
The review will assess all aspects of the scheme, including tariff levels and eligible technologies. It will be completed by the end of 2011, with tariffs remaining unchanged until April 2012, unless there is a need for greater urgency. Controversially, there will be a fast-track consideration of solar projects of over 50 kilowatts (kW), with any resulting changes to tariffs to be made as soon as practicable. Many would argue that 50kW is hardly 'supersize' - the fast track will capture some solar roof-based schemes, as well as the ground-based solar parks that are within the scope of the scheme, but perhaps should not be.
The consultation on the fast-track review was formally launched on March 18 2011 - submissions are sought by May 6 2011. As expected, it also looks into the low uptake of FITs by farm-based anaerobic digestion plants. Views are also sought by April 12 2011 on the scope of the comprehensive review of the scheme that the Department for Energy and Climate Change hopes will take place over the summer.
The application of the scheme to large-scale photovoltaic installations is being reviewed because the department is worried about the risk of such installations expanding rapidly over the next few years. This, in turn, could have a significant impact on whether the FIT scheme can deliver the savings to which the government is committed under the 2010 spending review, and whether it will work within that review's spending constraints. The concern is that such installations could draw funding from other technologies and scales of generation, and undermine the value for money of the scheme as a whole.
Farm-scale anaerobic digestion
Farm-based anaerobic digestion is being reviewed because it appears that the tariff is not high enough to make such schemes worthwhile, particularly in light of the non-financial barriers arising from the complexity of the technology.
The department intends to change the tariff bands with effect from August 1 2011. It has emphasised that the government will not act retrospectively, and that any changes to generation tariffs implemented as a result of the review will only affect new scheme entrants.
For large photovoltaic installations, the proposed new bands and tariffs are:
- £0.19 per kilowatt hour (kWh) for installations of more than 50kW and less than 150kW;
- £0.15/kWh for installations of more than 150kW and less than 250kW; and
- £0.085/kWh for installations of more than 250kW and less than 5 megawatts, and for standalone installations.
The tariff for installations of more than 250kW and standalone installations apparently means that they will benefit from the same rate as more cost-effective renewable technologies, such as wind. This represents a reduction of over 70% from the original tariff bands for standalone installations. The two new bands have been set by adjusting the original FIT modelling in light of evidence of falling costs of solar photovoltaic installations. They also aim to recognise the distinction between very large, industrial-scale solar developments and larger building-integrated systems that could be installed on schools or hospitals, for example.
For farm-scale anaerobic digestion, the proposed tariffs are £0.14/kWh for installations up to 250kW and £0.13/kWh for installations between 250kWh and 500kWh.
The department has stressed that changes to generation tariffs will have an impact on new entrants only; installations already accredited will not be affected. However, even before the consultation documents were published, there were concerns that the process would increase uncertainty for those looking to manufacture or invest in larger renewable energy projects, and might even jeopardise the United Kingdom's chances of meeting its renewable targets. The disappointment already expressed by some potentially affected parties suggests that the publication of the consultation paper has compounded and not allayed these concerns. Indeed, some argue that the band changes will have a retrospective effect in respect of development costs incurred on projects that are no longer economically viable.
A copy of the consultation paper is available at www.decc.gov.uk/en/content/cms/consultations/fit_review/fit_review.aspx.
For further information on this topic please contact Antony Skinner or Hannah Croft at Ashurst by telephone (+44 20 7638 1111), fax (+44 20 7638 1112) or email ([email protected] or [email protected]).