UK SMEs should opt for FIT, says energy minister

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British energy minister Matthew Hancock has attracted criticism from the U.K.’s solar industry for suggesting that British small and medium enterprises (SMEs) should use the feed-in tariff (FIT) rather than the controversial Contracts for Difference (CfD) scheme when funding their renewable energy projects.

Speaking at the Energy and Climate Change Committee yesterday, Hancock said: "As far as small businesses are concerned, we have FITs, especially on the renewable side. FITs are precisely there to have a much lower cost of entry; CfDs are designed for the big stuff and that’s expensive and we have a simpler, much more cheaper to apply for subsidy system for the little stuff."

Hancock’s grouping of SMEs with small residential installers angered U.K. solar watchdog the Solar Trade Association (STA), which has argued that in order to meet the typical pre-qualifying criteria for a CfD bid, a SME would need to have a spare £200,000 ($304,000) – a risk that many companies cannot afford to take. The STA believes that the CfD has been created to purposefully exclude many of the U.K.’s smaller companies, despite government rhetoric suggesting it will support the growth of commercial-scale rooftop solar.

"CfDs and FITs are very different mechanisms," said STA CEO Paul Barwell. "CfDs are only eligible for projects greater than 5 MW, FITs are designed for systems below 5 MW, so minister Matt Hancock should be actively promoting both schemes."

Hancock added that, as small business minister too, it was in his interests to support SMEs, but remarked: "The practicalities of signing up bill payers to these long-term contracts means that you have to be pretty sure that the other side will see it through," alluding to a lack of confidence in the longevity of many SMEs in the U.K.

Barwell, however, retorted: "If the message here is that SMEs have to move to smaller schemes under FITs because CfDs are not designed for SMEs then that is obtuse.

"SMEs have used the [Renewable Obligation Certificate] ROC for all sizes of large-scale deployment helping to provide much-needed competition in the electricity generation market."

The ROC rug, Barwell added, was pulled by DECC in May 2014, and the STA chief suggested the governments "needs to fix" CfDs to enable and encourage competition in the market.

"Further," concluded Barwell, "if everyone moves to smaller installs under FITs, then the tariffs will hyper-degress very quickly. Our modeling shows that with only modest growth the FIT standalone tariff could be too low, too quickly, and will restrict deployment."