Feed in Tariffs

The latest announcement from the DECC

On the 9th February, DECC launched a consultation on its decision to move the FiT scheme towards a tariff structure, replicating a successful model that has been deployed in Germany. In order to allow the British solar industry to operate within the tightly constrained budget the DECC proposes that such a scheme is necessary.

DECC has decided that, instead of targeting a specific rate of return, from July 1st, the tariff level should be set at a rate that “returns broadly within the range of 4.5 - 8% under central cost assumptions.”

DECC proposes that the starting tariff levels for July 1, should be set dependent on the levels of actual deployment of solar in March and April. As a result DECC has modelled three different scenarios depending on the level of capacity installed in March and April.

DECC’s proposed July 1st tariff rates are outlined below:

Band (kW)

1 April tariff

Option A

(large amount of PV installed previously)

Option B

Option C

(least amount of PV previously installed)

≤4kW

21p

13.6p

15.7p

16.5p

>4kW-10kW

16.8p

10.9p

12.6p

13.2p

>10-50kW

15.2p

9.9p

11.4p

11.9p

>50-150kW

12.9p

7.7p

9.7p

10.1p

>150-250kW

12.9p

5.8p

8p

10.1p

>250-5000kW

8.9p

4.7p

6.8p

7.1p

Stand alone

8.9p

4.7p

6.8p

7.1p

 

As you can see the most conservative option would see FiT tariff slashed by over 20 percent in July, Option A would see March tariff levels slashed by 35 percent. A 68.6 percent drop in just 8 months. A further 5 percent reduction on the July level of tariff will be enacted in October, with 10 percent reductions being introduced every six months thereafter.

Also being put in place is a contingency digression mechanism that will be put into action if actual deployment levels exceed 125% of expected levels before the planned digression. DECC will publish the planned trigger points in advance and Ofgem has been charged with monitoring the level of actual deployment, releasing a monthly report of installed capacity to the industry.

If deployment reaches one of DECC’s predetermined trigger levels then an immediate announcement will be made, enabling a two-month notice period before the lower tariff level is applied. So make sure you follow us on twitter for the latest news.

In the consultation DECC propose that Government would carry out an extensive annual review, in co-operation with industry to ensure that the mechanism “is controlling costs to an adequate extent and allowing the Scheme to achieve its statutory objectives.”

DECC published a table indicating how it foresees the baseline and contingent digression model working in the future. The table below has been modelled on central assumptions about costs reductions over the next three years and with a starting tariff of 13.6p in July.

Proposed generation tariffs for solar PV from 1.4.2012 to 1.4.2015

Band (kW)

Tariff Pt 1 April 2012

Tariff Pt 2 July 2012

Tariff Pt 3 Oct 2012

Tariff Pt 4 April 2013

Tariff Pt 5 Oct 2013

Tariff Pt 6 April 2014

Tariff Pt 7 Oct 2014

Tariff Pt 8 April 2015

< 4kW

21p

13.6p

12.9p

11.6p

10.4p

9.4p

8.5p

7.7p

>4-10kW

16.8p

10.9 p

10.4p

9.4p

8.5p

7.7p

6.9p

6.2p

>10-50kW

15.2p

9.9p

9.4p

8.5p

7.7p

6.9p

6.2p

5.6p

>50-150kW

12.9p

7.7p

7.3p

6.6p

5.9p

5.3p

4.8p

4.3p

>150-250kW

12.9p

5.8p

5.2p

4.7p

4.2p

3.8p

3.4p

3p

>250-5000kW

8.9p

4.7p

4.5p

4.1p

3.7p

3.3p

3p

2.7p

Stand alone

8.9p

4.7p

4.5p

4.1p

3.7p

3.3p

3p

2.7p

Source: DECC

While most of us in the industry welcome the introduction of a mechanism that will put an end to emergency reviews and ensure that the industry is never plunged back into the mess that it currently finds itself in, the severity of the proposed cuts concern us greatly.

So, please do not hesitate to contact us for a free, no obligation survey of your home or business. If it is right for you, there will never be a better time to invest in solar PV.