Earlier this month the Department for Energy and Climate Change (DECC) released its consultation on the Renewables Obligation Certificate (ROC) support for solar photovoltaic (PV) generating stations.

DECC is concerned that with costs in the solar PV industry continuing to fall, and more developers entering the market, the current level of ROC support could become financially unsustainable. DECC's proposed solution is to steadily reduce ROC support between 2013-2017 for solar PV stations which are accredited or add additional capacity on or after 1 April 2013.

Interested parties should consider responding to the consultation which closes on 19 October 2012.

1. Rates of degression

Current ROC support for solar PV at 2 ROCs/MWh would reduce to lower levels than DECC proposed in its original consultation (see here for e-bulletin on original proposals) and would be subject to further degressions for each ROC period from April 2013 to March 2017.

Table: ROC support for solar PV per MWh generated

To view table click here.

2. Calibrated to Feed-in Tariffs for solar PV

The proposed ROC support is broadly equivalent to the newly calibrated Feed-in Tariffs (FITs) applicable to solar PV stations that generate between 250kW and 5MW (see final decision on solar PV tariffs on DECC's website). DECC thinks this is an appropriate benchmark because it does not view FIT solar PV installations falling within the 250kW - 5MW band as being costlier than large scale solar PV installations.

3. Potential for divergence between RO and FIT support for solar PV

While the ROC support is to be initially calibrated to FIT levels, going forward ROC support will not change when FITs change. FITs will be adjusted quarterly on the basis of deployment. The annualised rate of degression is expected to be 7-13% per year (although it could be as high as 73% or as low as 3.5%). If the FIT degression rate is high, developers could be incentivised to switch from the FIT to the RO (where possible).

4. Possible consultation on scrapping RO support for sub-5MW stations

Reiterating its response to the RO Banding Review (see our e-bulletin here), DECC indicated that it may carry out a separate consultation on a proposal to exclude new solar PV installations at, or below, 5MW from the RO so that solar PV would only be eligible under the FIT scheme.

5. Response to consultation

DECC has requested comments from the industry on the proposed level of ROC support for solar PV installations, the costs and deployment potential associated with large scale solar PV installations (i.e. 5MW or larger), other cost assumptions which underlie DECC's proposal and the option of using the early review process provided for in the Renewables Obligation Order 2009 to control costs of solar PV support.

6. Useful links