The UK Department of Energy and Climate Change (DECC) has today published its decision on the FIT Review consultation. The Government has decided to proceed with its decision to slash the FIT rates for installations with a declared net capacity of greater than 50kW. There has been some better news for small-scale Anaerobic Digestion (AD), with an increase in FIT rates. The full decision document can be found here: http://www.decc.gov.uk/en/content/cms/consultations/fit_review/fit_review.aspx.

Solar PV

Much reduced FIT rates will apply to large-scale solar PV projects that have an "eligibility date" post 1 August 2011. The new rates will not affect projects that reach the finish line by 1 August. However, the Government has refused to consider any transitional arrangements for projects that are already underway but will not be ready by 1 August 2011. The Government has said that:

The fast-track review of the FITs scheme was launched in response to evidence suggesting that larger solar photovoltaic (PV) projects would be deployed much more quickly than originally expected. … As the spending envelope for the scheme is limited, the construction of these projects would threaten the amount available for smaller scale installations. ...We appreciate the concerns raised by those who have already invested in projects with long lead-in times, and understand that in many cases there will be significant sunk costs. However, for the sake of the industry more widely, it is vital that we protect the integrity of the scheme....

The new rates for large-scale solar PV are as follows:

Click here to view table

The Government has also confirmed that it will be carrying out a wider review of the FIT in the summer. The decision document states that:

Many respondents to the fast-track review consultation made comments that were outside the scope of the fast-track review. In particular, a number of views were received on the growth of so-called "rent a roof" schemes involving aggregation of <50 kW installations, and on alternative tariffs designs such as automatic degression. ... will use these to inform the development of the comprehensive review of the FITs scheme which was announced on 7 February and is currently under development.

Anaerobic Digestion (AD) While the main focus of the review was solar PV, the review also considered the FIT rates for small-scale Anaerobic Digestion (AD). There is some good news on that front as the Government has decided to increase the rates, although the new rates may not be as high as had been hoped for. The increased AD tariff, which will be introduced on 1 August or the date of state aid approval, whichever is later.

The new rates for small-scale AD are as follows:

Click here to view table

Timing

To implement the changes, the Government needs to amend the electricity supply license conditions that establish the FIT scheme. The proposed modifications to the license conditions have to be laid before both Houses of Parliament for a period of 40 days and be approved, before they can take effect. Given that the House of Commons will start the summer recess on 19 July, DECC has laid the amendments just in time.

The Future of Large-scale Solar PV

The decision leaves investors in solar PV in a very difficult position. Some industry players are pinning their hopes on a judicial review of DECC's actions, that was launched in April. The High Court has given the group of investors leave to proceed with the judicial review.

Some investors in large-scale solar projects may also be considering the Renewables Obligation as a source of support, but the current level of support is generally considered to be too low to make solar PV projects commercially viable. Currently, solar PV installations are eligible for 2 ROCs for each MWh. In May, the average ROC price was £51.24.