A shadow over the future of solar power? The Feed in Tariff consultation
11 November 2011
This article was included in the Winter
2011 issue of Informer- the real estate
If Parliament is any kind of barometer, then it
seems that the UK really does like to talk about the weather.
Just as the end of British summer time
reignites the annual debate over the merits of daylight saving
changes, solar power once is again under the spotlight – this time
in the shape of an accelerated consultation on the Feed in Tariff
Introduced in April 2010, the FIT scheme aimed
to encourage green energy production and help the UK meet its EU
renewable energy targets by 2020. It pays a premium tariff
for power generated by qualifying installations, encouraging
financial investment in these technologies with potentially
However, the scheme appears to have been a
victim of its own success, with the number of registered
installations far exceeding expectations. The resulting cost
of funding the tariff has grown beyond initial targets. In
response, the Government has now accelerated its review of
potential cuts to the tariff.
Part I of the new consultation was published
on 30 October 2011 and proposes to reduce the burden on the scheme
- Reducing generation tariffs for solar photovoltaic (PV)
installations by about 50%. It is proposed that
reduced tariffs will apply from 1 April 2012. Schemes
installed and registered before 12 December 2011 will still benefit
from current rates but those registered between 12 December 2012
will benefit from current tariffs only until 1 April 2012, at which
point the new tariffs will apply.
- Introducing new multi-installation tariffs for
collective solar PV schemes. If an individual or
organisation receives FIT payments from more than one solar PV
installation, a new tariff may apply in some circumstances
regardless of the date of registration.
- Introducing a new energy efficiency
requirement for an installation to qualify for the
scheme. This is to strengthen the link between FITs and
energy efficiency requirements.
The ‘big six’ energy providers in the UK (who
ultimately fund the scheme by buying the solar PV energy at higher
than market rates) have welcomed this consultation - though solar
PV producers will in turn see their return on investment
reduced. So is this likely to stem the flow of solar PV
projects? What does it mean for those planning to install solar PV
but who have not yet got their project up and running?
Indications are that solar PV will nevertheless remain a
viable option, even if investments become a longer term
For example, one of the key reasons for the
higher than expected uptake of solar PV is the dramatic fall in the
cost of those systems - by as much as 30% since 2010, as against
Government projections of 9%. Expectations as to payback
periods or overall financial return may need to be adjusted, but it
will not require a significant further drop in cost for the fall to
match that proposed to the cost of tariffs.
The Government has invited interested parties
to respond to the consultation by 23 December 2011. Further
details of the consultation and how to respond can be found on the
A further consultation on the review will be
published at around the end of 2011 which will consider the new
tariffs and the FIT scheme as a whole, with the aim of implementing
any such results in the first half of 2012.
Article by Alan Woolston, Partner in the
Construction team at
Field Fisher Waterhouse.