FIT cuts improve after solar industry pressure
FIT rates for solar installations under 1MW are to be reduced from 12p/kWh to 4.39p/kWh, an increase from the proposed reduction of 87 per cent to 1.63p/kWh, with the new rates becoming active on February 8, while the budget for FITs will be capped at approximately £35m per year.
Between 9,700 and 18,700 solar jobs supported by FITs could be lost according to the government’s Impact Assessment, released alongside its final decision.
Rates for the smallest band of wind installations have been reduced further from the proposed figures to 8.54p/kWh, while the rate for 5-10MW wind generators has almost doubled and will match the lower band, with the same rate also applying to Hydro installations of less than 10MW, falling to 4.43p/kWh for generators with over 200MW of capacity.
The deadline for installations to achieve the current rates is set at January 15, while individuals who miss the initial deadline will be placed in a queuing system, with their FIT applications being frozen until the new rates come into force.
Just under 90 per cent of the 2,557 respondents to the government’s FIT consultation disagreed with its proposed cuts, announced in August, with the majority of respondents citing the unrealistic rate of return, along with an underestimation of hurdle rates.
Energy Secretary Amber Rudd states that her priority is to ensure energy bills for hardworking families and businesses are kept as low as possible whilst ensuring there is a sensible level of support for low carbon technologies that represent value for money.
"We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model. When the cost of technologies come down, so should the consumer-funded support,” she said in a statement.
The government’s proposed FIT rate cuts were met with fierce opposition from the solar industry, with a number of firms and organisations speaking out against the proposals in the form of campaigns and reports that challenged the suggested rates.
Paul Barwell, CEO of the Solar Trade Association, claims the government has “partially listened” to the industry.
“It’s not what we needed, but it’s better than the original proposals, and we will continue to push for a better deal for what will inevitably be a more consolidated industry with fewer companies.
“However, in a world that has just committed to strengthened climate action in Paris and which sees solar as the future, the UK Government needs to get behind the British solar industry.
“Allocating only around 1% of its clean power budget to new solar is too little, particularly when solar is now so cost-effective. Poor ambition for solar risks missing out on not only our renewable energy targets in the UK, but on the world’s greatest economic opportunity too.
“The industry will certainly try its hardest but we will be pressing Government to do much more to boost solar power.”
Jan-Willem Bode, CEO of community energy firm Mongoose Energy, believes that the government could be “trying to make bad news look good.”
“The industry needs to be subsidy free in the long term, and can do it in the medium term. The announcement will have consequences on both the smaller players in the community energy market and the renewables industry in general.
"The FIT has, in the government's words, 'been hugely successful in attracting investment’ for renewables – and it has played a vital part in helping to slash the cost per unit of solar energy.
"But the FIT needs to be more than just a way to get people to invest in tiny projects if we are to meet the commitments that we agreed to in Paris [at COP21], to maintain energy security and diversity."
Dr Nina Skorupska, CEO of the Renewable Energy Association (REA), welcomes the revised figures.
“From where we were after the initial consultation this is a real improvement and praise has to be given to DECC ministers in their willingness to listen and change,” she said.
“The past 6 months have been challenging for our members and the renewables industry, but we now have to draw a line and turn our attention to building a stable, robust and enduring industry leading to a business built without subsidy.”
The government is targeting 4.8, 5.9 and 9.2 per cent return rates for solar, wind and hydro respectively under the new tariffs, which are now based on revised hurdle rate ranges, incorporating new information received through the consultation.
