This is the second of three articles by Adam Payne which are intended to summarise the recent overhaul of the mechanics that have structured government support for the UK solar industry in recent years.
In the previous article I outlined how changes to subsidy support for the UK solar industry may undermine the fundamentals of last month’s climate change summit in Paris. In this article I delve into the detail of the consultation outcome, and In my third article I will consider the long term future prospects of the UK solar market.
The long awaited outcome of the Government’s FIT consultation was released on 17th December 2015. The consultation, which commenced on 27th August 2015, set out to review the level of support offered by the FIT scheme.
The principle argument behind the review has stemmed from the success of solar deployment in the UK and the uptake of the Government’s subsidy schemes.
Solar deployment throughout the UK has rapidly developed over the past 5 years and the Government anticipates what it considers to be an unacceptable over spend on the levied scheme which, in turn, will be passed onto consumer energy bill prices.
The cost of the increase in consumer energy bills is widely debated. However, a conservative estimate would indicate a potential increase of approximately £7. This sum, and the 65% decrease in subsidy levels that has now been imposed by DECC, should perhaps be set against the potential value to the country of securing a clean and secure energy source for the long-term future and how this interplays with our commitments on climate change objectives, as well as the job security of 25,000 people who are, or have been until recently, directly associated with the UK solar industry.
The headline points of the consultation response might usefully be summarized as follows:
– from 15th January 2016, the maximum overall budget for FITs will be reduced to a cap of £100m per annum across all technologies,
– all new applications applying for FITs will be subject to a new system of caps,
– new tariffs for solar outline 0.87p/kW for stand-alone projects, and
– <10kW system installations will receive 4.39p/kW, down from the previous 12.03p/kW.
Under the new cap system, the Government has limited deployment to a certain number of installation sizes that could come forward per quarter. Provisions have been made for just 5 stand-alone projects to be eligible for FITs per quarter from Q1 2016 to Q1 2019.
One of the most significant changes to come out of the consultation was the decision to remove the ability to pre-accredit projects under the scheme. The rationale behind this development was again, it appears, to stem the then current strong deployment progress, but the move has been particularly detrimental to investor confidence since there is no longer any guarantee of obtaining accreditation.
To further confuse the industry the Government has now decided to reinstate the process of pre-accreditation from 8th February 2016 for solar projects larger than 50kW under the new caps. The validity period, i.e. the time in which the project must be built, energised and pre-accreditation converted to a ROO-FIT application (full accreditation), is only 6 months.
This is, in my view, an alarmingly narrow window of time bearing in mind the entire planning application and decision making process (and its inherent unpredictability, as well as expense), not to mention the 90 day turn around for ENA applications to Distribution Network Operators.
Developers across the country have since scrambled to get their pipelines completed. As much as 3.9GW of solar was installed during 2015, eclipsing the previous record of 2.5GW in 2014.
In the third and final article of the series, I will attempt to outline the direction in which the solar market could go in spite of the downturn in investment and investor confidence currently being experienced.
Adam Payne is a technical consultant for Prospect Energy Ltd. His background is predominately in solar deployment throughout the UK having worked on the development of 76MW of ground-mounted solar assets to date.
This blog is not intended to constitute legal advice. We accept no responsibility for loss or damage incurred as a result of reliance on its content.
Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.