Wind and solar power chiefs have denounced the UK government decision to scrap feed-in tariff subsidies – and with no plans to replace them – as being a hammer-blow to the industry and ‘not FiT for purpose’.
Solar industry advocates had hoped there would be a replacement for the scheme, but a newly-launched government consultation launched has made it clear there will be no extension or new alternative to the tariff when FiT is axed in Spring 2019.
The Feed-in Tariff was established in 2010 and provides payments to owners of small-scale renewable generators at a fixed rate per unit of electricity produced, ensuring that the cost of installation is recouped over the lifetime of the generator.
As the cost of renewables has plummeted over the past eight years, this fixed rate payment has fallen by up to 90%.
The 2015 Feed-in Tariff review set out that the current FiT scheme would close in April 2019. The Government committed to setting out its policy on post-2019 support for small-scale renewables over a year ago but this has been repeatedly delayed, causing huge uncertainty for companies in the sector.
Consequently, anyone installing solar after April will no longer even be paid for exporting their excess solar electricity to local power grids.
The only financial benefit to people fitting solar at home will be if they consume the electricity themselves and reduce their energy bills. A typical solar installation costs around £6,000, less than half what it did when the FIT started.
A BEIS spokesman explained: “As costs continue to fall and deployment without direct subsidy becomes increasingly possible for parts of the sector, it is right that government acts to ensure continued value for money for billpayers over the longer term.”
Key aspects of the proposals put forward by BEIS – which the Solar Trade Association says must be crystallised urgently – are;
- Maintaining the export payments for surplus power exported to the grid for householders and businesses, in line with the recently published EU Directive;
- A replacement enforcement mechanism for the maintenance of high industry standards, which have been delivered through the Microgeneration Certification Scheme;
- The role of aggregators for the services ‘smart’ solar homes can provide, and
- The removal of tax anomalies, which now present major distortions to the market for subsidy free solar.
Chris Hewett, chief executive of the STA said: “Feed-In Tariffs have enabled around 800,000 households and 28,000 businesses to generate their own clean solar power to date, transforming the future of energy in the UK, and last week 10% of all UK electricity was generated by solar.
“This would simply not have happened without the Feed-in-Tariff. The good news, as we look beyond FITs, is that solar is coming of age and while solar always makes great environmental sense it now makes economic sense for most investors without public subsidies given fair treatment by government. An average domestic solar system cost £12,000 in 2010. It is more like £5,000 today.
“The bad news is that government has been crystal clear on what policy measures will stop – including even very basic rights to fair export payments – but they are frighteningly vague on what comes next.
“There is real dismay that there is now a serious and needless policy gap between the end of FITs and the start of the new regime.
“We therefore ask the government to work with us and with the industry as a matter of urgency to fill that gap and ensure a smooth transition next March.
For domestic solar, the price of a substantial 4kW installation has fallen from around £12,000 in 2010 to around £5,000 today, with even lower prices where local authorities run bulk purchasing schemes. Solar will continue to make economic sense to households with high levels of self-consumption, which can also be maximised through the installation of battery storage.
However, the STA is looking for new policies to boost the domestic market such as through Green Mortgages and the expansion of interest free loans, which are currently available in Scotland, across the UK.
The STA said that this market has effectively operated without subsidy since 2016.
However, the market was further damaged by the imposition of unexpected and sharp business rate rises on self-owned rooftop solar in April 2017.
The STA has been asking the UK Treasury to exempt rooftop solar cells and panels from business rates to level the playing field with on-site gas, as well as to grant enhanced capital allowances to solar PV. Industry players believe these changes would bring on a significant amount of investment in this market.
Barriers on domestic metering need to be resolved and markets for local flexibility have not yet developed in the UK – meaning that ‘smart’ homes and offices are not yet able to offer and monetise their services. Neither are innovative energy suppliers able to offer meaningful Time of Use Tariffs.
However, alongside its decision to dump FiT, the Department for Business, Energy and Industrial Strategy has also published a call for evidence on potential new policies for small-scale renewables.
Renewable UK also expressed disappointment at the decision to end the FiT subsidy scheme with no plans to replace it.
A spokesman said: “This is a major blow to small-scale renewables. The government has known the FiT would be closing for three years and the fact that they are only now beginning the conversation about new policies is far too little, far too late for many companies.
“Small-scale renewable energies are a vital part of creating a more local, smart power networks that will be central to the UK future energy system.”
“Companies in the renewables sector have helped tens of thousands of homes and businesses to cut their energy costs, and have grown into a thriving industry that exports around the world.”
26 Jul 2018