UK to propose drastic FIT cuts starting 2016

The U.K.’s Department of Energy and Climate Change (DECC) has today published the outcome of its feed-in tariff (FIT) review, revealing proposals that could see the FIT rate cut by almost 90%.

From January 1, 2016, DECC is proposing to impose cuts to all bands of the FIT, and will also enforce a default rate degression every quarter. This accelerated pace of degression could see the FIT end altogether for some bands by the beginning of 2019.

DECC’s proposed generation tariffs for January next year would be as follows:

0 -10kW: 1.63 pence per kWh (currently 12.47p/kWh for <4 kW)

10-50kW: 3.69p/kWh (currently 11.30p/kWh for 4-50kW range)

50-250kW: 2.64p/kWh (currently 9.63p/kWh (50-150kW) and 9.21p/kWh (150-250kw))

250-1,000kW: 2.28p/kWh (currently 5.94p/kWh in range 250kW-5MW)

> 1,000kW: 1.03p/kWh (currently 5.94p/kWh).

In DECC’s FIT Review document, the department states that these new tariff levels "seek to provide sufficient incentive for the deployment of well-sited projects, providing a rate of return appropriate to current market conditions".

The review also outline proposals to amend the default degression mechanism, instigating enforced degressions every quarter regardless of whether installation figures have been reached, as is the current system. However, this deployment-based degression will still be taken into account and could see a further 10% rate cut added to automatic degressions.

A further proposal would be to move the FIT indexation away from retail price index (RPI) and tally it to consumer price index (CPI), while concerns over the structure of the export tariff may prompt DECC to remove that tariff for solar projects larger than 50 kW.

In its Impact Assessment document, DECC summarizes the rationale behind its intervention actions, citing "financial pressures" on the Levy Control Framework that solar’s success has wrought. DECC claims that the option of doing nothing, or closing the FIT scheme fully, was never viable, but admits that these proposals would serve to shave around 6 GW of additional solar PV capacity from the U.K.’s 2020/21 projected portfolio.

Industry attacks ‘alarming’ proposals

In responding to today’s DECC proposals, industry body the Solar Trade Association (STA) labeled the review ‘alarming’, calling it the third damaging consultation in a summer characterized by shock policy announcements that have served to undermine the U.K. solar industry.

"The proposals put forward by the government today, which will now undergo a period of consultation, would be hugely damaging for the U.K. solar industry and we are now consulting quickly with our member companies as to how to respond," said STA’s head of policy, Mike Landy. "We will provide a detailed response shortly, once we have considered the proposals in more detail. However, we regret that proposals to suddenly cut tariffs combined with the threat of closure of the scheme next January will spark a massive market rush. This is the antithesis of a sensible policy for achieving better public value for money while safeguarding the British solar industry."

The CEO of leading U.K. solar company Solarcentury remarked that the proposals "add to the calculated turmoil" that the government has unleashed on the solar industry since it won power in May.

Frans van den Heuvel added: "In little more than three months the Conservatives have turned upside down the certainties that had characterized the U.K. renewables market and the cross-party consensus that underpinned it."

Should the proposals go ahead, van den Heuvel believes that it will lead to a wholesale collapse in solar take-up across the small-scale sector – a sector that has long-been the most popular form of renewable technology in the U.K.

In explaining its proposals, DECC stated in its Impact Assessment that the solar industry has proven "resilient to previous significant changes to FITs" in the past, stressing that the new rates and enforced degressions have been planned in context of solar’s enduring ability to survive change.

The proposals were published just days after an alliance of leading businesses and organizations had written to British Prime Minister David Cameron urging the government not to cut the FIT rate too drastically. This latest blow for the U.K. solar industry comes just weeks after DECC announced it is to end the ROC scheme for sub-5 MW solar arrays early, finishing on April 1, 2016.

Consultation on the current proposals run through until 23 October.