Further UK PV FIT cuts unlikely amid weak capacity growth

23. November 2012 | Markets & Trends, Global PV markets | By:  Bowden Jeremy

Solar capacity growth for the August to October period appears to be below the level required to trigger further feed-in tariff (FIT) cuts in February, according to figures released today by the U.K.’s Department of Energy and Climate Change (DECC).

The Union Jack flag.

With the U.K. solar market sagging, futher FIT reductions appear unlikely.

The figures show that around 73.5 MW were added in the domestic sector in the three months to November. This is well below the 100 MW or so required under current guidelines to trigger a 3.5% cut in FIT levels, and well down on the total added in the May-July period, which triggered FIT cuts this month.

A series of recent sharp FIT cuts have caused U.K. photovoltaic installations to slump to a fraction of last year’s levels, and the U.K. government is now attempting to increase stability by linking FIT levels to capacity growth. If targeted capacity growth for a three month period is exceeded, the FIT rate for the capacity band in question is reduced by 3.5% from the following three month period. So in theory, further FIT cuts will be slowly introduced in line with falling costs, maintaining a steady internal rate of return.

From November 1, the first cuts to be triggered by capacity additions were implemented for domestic and sub-50kW sectors based on capacity growth to August. Stagnant growth for installations above 50 kW meant November FITs for that category were unchanged.

The DECC figures show that the capacity installed from August to October falls below the government’s target range in all tariff bands. The latest figures released are for the week to November 18, and show that 3.8 MW of domestic capacity was added, bringing the U.K. total to 1.36 GW. November’s growth will count towards possible FIT cuts from May.

Cutting November tariffs when the impact of cuts in August have yet to be felt, risks stalling capacity growth, according to some developers, who claim an installed capacity floor is needed to raise tariffs if installation rates collapsed.

Since FITs were introduced two and a half years ago, there have been five major consultations and reviews; and tariffs have been cut on four different occasions. A number of companies have already successfully claimed damages from the U.K. government as compensation for earlier FIT cuts.

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