In our last issue, we predicted that
the Government's planned review of the Feed-In-Tariff (FIT)
regime, announced in the CSR, would be brought forward and urged
those looking to take advantage of the present rates to act
quickly. Sure enough, the Government launched a review of the
tariff in March – a year early - and changes to the
scheme have been brought forward.
Two forms of technology have been targeted for immediate action
and will see changes in tariff rates from August this year. Large
scale Photovoltaic (PV) solar energy installations have been hit
very hard, perhaps fatally for many planned projects, with cuts in
the available tariff of around 40% for schemes above 50kW peak
capacity and 70% for schemes above 250 kW.
These cuts arise from the Government's concern that a recent
influx of applications for 5MW plus solar farms will swallow the
entire FIT budget – taking support away from
micro-renewables and less popular technologies. One of those less
popular technologies, farm based Anaerobic Digestion (AD), is set
to benefit from a modest tariff increase. At the end of 2010 there
were only two AD schemes claiming FITS, as against 17,250 PV
installations.
Ofgem releases data each month on the number and types of
installation claiming support FITs. In September 2010 there were
9,800 installations claiming FITs. That figure has risen to nearly
31,000 in this month's report. This is a significant jump but
it is still far short of Government estimates of the number of new
installations required each month to meet the UK's 20/20
targets. The previous Government put this figure at around 6,500
installations per month. Ofgem's figures suggest that the FIT
regime has fallen short of this aim.
Only a tiny proportion of those currently claiming FITs are
commercial operations (less than 2%), although they account for
around 21% of the total installed capacity. This would appear to
confirm Government concerns that they could take the lion's
share of benefits under the scheme. However, the counter point to
this concern is obvious. If 2% of the installations are generating
20% of the output, that 2% must be doing something right.
Moving to a low carbon economy requires change at every level of
society; while it is important to encourage the installation of
small scale renewables, the driver of incentivised schemes such as
FITs is surely to increase the amount of energy the country, as a
whole, is generating from renewable resources and so, in that
respect, anything that achieves that aim should be
encouraged.
The Government's response to this criticism has been to claim
that FITs were designed to encourage initial investment in
technology up until the point where it can become self-sustainable.
It argues that PV now attracts enough investment in its own right
to support itself. It remains to be seen whether this is the case,
but a point that appears to have been lost by the Government in
this ever shifting regulatory and policy background is that
investors, particularly those investing in new technologies,
require certainty, and pulling the rug from underneath this
business sector a year early does not provide that.
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