Solar industry reeling at ‘self-defeating’ Feed-in Tariff proposals

The Government has today published its scheduled review of the Feed-in Tariff scheme [1] for supporting small-scale renewables, including solar PV. The proposals have shocked the solar industry, which is already reeling from a wave of damaging policy changes.

The deadline for responses to the consultation is 23rd October.

The Solar Trade Association has been engaging with officials and ministers over the last few months demonstrating how the FIT framework could be reformed to provide much better value for money while targeting parity with fossil energy around 2020. The STA published its Solar Independence Plan for Britain [2] in June setting out proposals based on a detailed budget model of the solar Feed-in Tariff. The STA estimates that it will cost just another £1.70 per year on energy bills between now and 2020 to deliver a million more solar homes and grid parity. Polling by DECC shows solar is the UK’s most popular energy technology.

Mike Landy, Head of Policy at the Solar Trade Association commented:

“We don’t agree with these self-defeating proposals and will be urging DECC to take up our alternative. A sudden cut combined with the threat of scheme closure is a particularly bad idea – it will create a huge boom and bust that is not only very damaging to solar businesses and jobs but does nothing to help budget constraints. We really are astonished at how self-defeating these proposals are. Instead, we are calling on the Government to work with the solar industry to deliver our plan for a stable glide path to subsidy-free solar.”

Leonie Greene, Head of External Affairs at the STA added:

“The Conservative manifesto said nothing about attacking the British solar industry, which has flourished thanks to public support and delivered unprecedented cost cuts. Government should back that momentum, not push the industry over a cliff when it is so near to being able to repay public investment through lower & more stable bills in future – as well as tens of thousands of jobs. The British public knows solar is the future and are embracing this technology.

We have already written to the Prime Minister with 100 local authorities, community energy groups and professional associations in support of FITs. When Parliament returns we intend to grow this alliance and fight hard for a policy and a technology that gives power to the people.”

The letter to David Cameron was submitted on Friday 21 August 2015 [3].

The proposals set out by DECC will see Tariff rates for domestic schemes (now up to 10kW) cut from 12.9p today to 1.63p/kWh next January.

At present commercial solar rooftops only account for 5% of the solar being deployed under the Feed-in Tariff and the sector requires a boost. The STA notes the relatively higher proposed FIT levels for commercial sector schemes (3.69p – 2.28p/kWh), which have a higher hurdle rate for investment. However stringent caps to annual deployment and the threat of scheme closure if deployment surges – a likely prospect given the way proposals have been structured – create yet further uncertainty for commercial rooftops.

Mike Landy said:

“If DECC & Treasury insist on making such damaging and unjustified cuts, then they will need to develop alternative policy proposals to drive commercial sector deployment. The upcoming Energy Efficiency Tax Review provides exactly the opportunity to do so. But we need to see some positive proposals very quickly to mitigate the shattering of confidence across the solar industry.”

Summary of DECC’s proposals:

The main news is that the tariffs will be cut drastically next January 2016:

Other key changes that will affect the industry are:

  • Some of the tariff bands are being changed: see the above table.
  • 0-4kW and 4-10kW are being merged
  • 50-150kW and 150-250kW are being merged
  • 250kW-5MW is being split into 250kW-1MW and 1-5MW.
  • DECC is proposing forced degression each quarter, in the form of a tariff cap.
  • Tariffs reduce to zero under domestic and standalone by 2019.
  • Deployment-based degression will be maintained, and changed to 5% and 10%.
  • A deployment cap per band: this means that no further schemes above the cap will obtain a tariff.

The degression thresholds and deployment caps for solar PV are shown below, per quarter. They change slightly over time, so these are the ones from January 2016.

Therefore there is an overall cap on deployment of 42MW per quarter (170MW/year) which also triggers 10% degression.  This compares with 620MW deployment over the last 12 months, from 150,000 installations.

There are other changes which are less significant, but still have an impact:

  • The removal of “deeming” export, therefore requiring a smart meter for each installation
  • Uplifting the EPC D requirement for the higher rate to an EPC C (obtained before the installation of the solar PV), with exemptions for schools and community schemes.
  • Changing the indexation from RPI to CPI
  • All systems must be notified to the DNO
  • The removal of extensions from the scheme

Notes to Editors

[2] The STA’s Solar Independence Plan, which sets out our proposals for changes to solar support schemes, can be found here, and the accompanying press release can be found here.
[3] The letter signed by 100 diverse stakeholders in FITs can be found here.

Please find some useful facts and figures about the Feed-in Tariff for solar and the UK solar industry here:

  • At present the Feed-in Tariff for solar PV is 12.92p/kWh for a typical residential solar system.
  • The solar industry and its supply chain consists of 3,000 small and medium sized businesses and employs 34,000 people, providing more value to the UK economy than many other low-carbon technologies.
  • The cost of solar has come down 70% in the last five years. It is a very cheap way of delivering clean electricity going forwards.
  • Over 80% of the British public supports solar power. It is the nation’s favourite source of energy, and there was nothing in the Conservative manifesto about cutting support for solar.
  • The Solar Trade Association estimates that thanks to falling costs, the extra homes expected to go solar this year under the Feed-in Tariff scheme will cost households just an extra 50p on bills. Feed-in Tariff solar as a whole will this year account for £7 on annual household energy bills, the majority of which is due to solar that was installed before 2012 during the rush when tariffs and costs were high.
  • Over 80% of the current cost of all solar support is a result of the 2011 rush when tariffs were three times higher, and 64% of this is domestic. The total amount going to solar as a whole masks how cheap solar has become going forwards.

For more detailed information please see the STA’s briefing document: Solar in the UK: facts and statistics

For further information or to request an interview, please contact:

Name: Joe Moss
Title: Membership and Communications Administrator
Tel: 0203 637 2945
Alternative tel: 0203 637 3301

Background on the Solar Trade Association:

The mission of the Solar Trade Association is to empower the UK solar transformation. We are paving the way for solar to deliver the maximum possible share of UK energy by 2030 by enabling a bigger and better solar industry. We represent both solar heat and power, and have a proven track record of winning breakthroughs for solar PV and solar thermal.