DECC proposing to cut solar feed in tariff rates by 87%
The Department of Energy and Climate Change (DECC) is proposing to cut the feed in tariff rates for solar PV installations by as much as 87%. Publishing the outcome of the long-awaited feed-in tariff review, the government is proposing deep cuts to all bands from 1 January 2016.
With the proposed increase of VAT by a further 15& in December 2015 this could spell disaster for the renewable energy growth market in the UK.
A recent Which reports suggests buying your solar panels now.
Below are the proposed generation tariffs for 1 January 2016:
Feed-in tariff rate (p/kWh)
In addition to the swingeing cuts to the tariff rate, DECC is also looking to enforce default digression each quarter which would see FiT support for some scales of solar end on 1 January 2019. DECC will still implement a contingent digression mechanism that could degress tariff rates by a further 10% depending on deployment. DECC is also proposing to change the indexation of the feed in tariff scheme, moving it away from retail price index (RPI) to consumer price index (CPI). The department argues that CPI is a more appropriate way of compensating investors for inflation.
The government has also noted a number of concerns about the structure of the export tariff under the FiT, most notably the gap between the export tariff and market prices for FiT installations. DECC has outlined a number of proposed changes such as removing the export tariff for >50kW projects, lowering the export tariff and annually reviewing the export tariff. However, it does not intend to make any changes to the export tariff yet and is seeking feedback on its proposals first.
The government’s accompanying Impact Assessment document admits that the proposed changes to the feed-in tariff rates would wipe 6GW off UK renewable generation capacity by 2020/21. DECC states: “There is a risk that these changes – combined with the separate consultation proposals to remove per-accreditation – may result in significantly reduced rates of deployment…However, industry has proven resilient to previous significant changes to FITs, and has been able to adapt to previous tariff reductions and the introduction of digression. The risk of reduced deployment has to be seen in the context of this and of the need to have more robust controls on spend to enable the FiTs scheme to continue. More broadly, it should be seen in the light of most of the technologies in the scheme having already deployed more now than had been expected by 2020.”