The UK Department of Energy and Climate Change (DECC) last week published its response to the Consultation on Comprehensive Review Phase 2B: Tariffs for non-PV technologies and scheme administration issues.

Timing

The changes as a result of the process will be introduced to Parliament after the summer recess and, with a few minor exceptions, will be implemented from 1 December 2012, subject to the parliamentary procedures. Tariff changes will be introduced by amending the Standard Conditions of Electricity Supply Licences, subject to the parliamentary process set out in the Energy Act 2008, and any necessary state aid approval from the European Commission. DECC will introduce these changes as soon as practicable after the summer recess and they will take effect from 1 December 2012, and apply to all installations with an eligibility date on or after that date. Some tariff changes may be dependent on final state aid approval.

Tariffs for Anaerobic Digestion (AD), Hydro, Wind and Micro-CHP

The consultation set out proposals for new tariffs based on research undertaken to update the costs and other factors affecting all technologies eligible for Feed in Tariffs (FITs). The review was also undertaken to move to a more consistent approach across all renewable energy support schemes. DECC proposed an upper limit of 21p/kWh for generation tariffs, with no tariff increases, partly on the basis that the highest PV generation tariff is now 21p. For the highest bands DECC kept an equivalent level of support with the Renewables Obligation (RO). So there would be generally lower generation tariffs for wind across the board.

As proposed in the consultation DECC will continue to link generation tariffs for the largest capacity band for each technology to those that that apply to an equivalent installation in the RO. It is important that there are not perverse incentives to choose one instrument over the other – or to inefficiently undersize projects so they are eligible for FITs rather than the RO. From the date of implementation of the policy changes, DECC will adjust generation tariffs for these bands to levels it considers to be equivalent to the support currently available under the RO. These are calculated using a value of £44.78 per Renewables Obligation Certificate (ROC), which is 1.1 times the 2012/13 buyout price. Generation tariffs from 1 April 2013 until 31 March 2017 will be set at a level equivalent to the levels of support provided under the RO to a 5MW plant as a result of the RO Banding Review. Tariffs for 2017/8 and beyond are set at the level of 2016/17. However DECC expects that tariffs will be reviewed before this time, particularly given the wider context of Electricity Market Reform, so this should be taken as an indicative position meanwhile.

Tariffs in the bands set at levels equivalent to the RO will not be subject to annual degression changes unless deployment in the relevant band in the previous year is greater than 150 per cent of the expected level.

Preliminary Accreditation – AD, Hydro, Solar and Wind

As proposed in the consultation, DECC will be introducing a system of preliminary accreditation for certain prospective FITs generators. The system will primarily be available to solar PV and wind installations of greater than 50kW declared net capacity, and all AD and hydro installations. To be eligible, proposed installations must have planning approval and evidence of acceptance of a firm grid connection offer, if needed, and hydro installations must have any necessary environmental approvals. The system will provide a tariff guarantee for a fixed period of six months to two years depending on the technology. The tariff guarantee will apply only to the capacity that is included in the preliminary accreditation application. DECC will also be introducing a tariff guarantee system for community energy solar PV projects of 50kW or less.

Some of the features that the system of preliminary accreditation will have are as follows:

  • Entitlement to seek preliminary accreditation will be narrower than it is for the RO. Proposed installations will be required to have planning approval (as for RO preliminary accreditation), and will also need to have met several prerequisites, for example evidence of acceptance of a firm grid connection offer, if a grid connection is needed.
  • Operators will be required to have the relevant prerequisites in place before making an application for preliminary accreditation to Ofgem.
  • Once accredited, installations found to be eligible for preliminary accreditation will receive the tariff that they would have received if they had been accredited at the time they applied for preliminary accreditation.
  • Tariff guarantees will apply for a fixed period from application for preliminary accreditation. These will be (i) six months for PV, (ii) one year for AD and wind and (iii) two years for hydro. Tariff lifetimes will still apply from the installation’s commissioning date.
  • The tariff guarantee will apply only to the capacity, site and technology that is included in the preliminary accreditation application.
  • An application for (or approved) preliminary accreditation may be withdrawn.
  • In order to convert preliminary accreditation to final accreditation, installations must meet all other relevant eligibility criteria at the time etc.

Amendments to the definition of “site”

The consultation included questions around the definition of “site”: whether it was sufficient; whether it needed further definition; and specifically how the private wire issue (where individual units are treated as one because they all feed into the same electricity supply point) could be resolved. DECC is amending the definition to ensure that:

  • several installations, e.g. wind turbines or solar panels, at a single location are not treated as separate sites because they register separate Meter Point Administration Numbers (MPANs);
  • separate residential units on a private wire network (i.e. park homes) are treated as separate sites; and
  • hydro installations that are physically separate are not treated as a single site because of Distribution Network Operator (DNO) constraints that do not allow them separate connections.

The full list of documents published by DECC can be found here.