UK: Fourth Energy Account - The 2011-16 Incentives For Photovoltaic Power Generation

Last Updated: 3 June 2011
Article by Energy Group

Summary

The Fourth Energy Account sets out the incentives for installing photovoltaic power plants from 1 June 2011 to 31 December 2016. It is subject to the transitional rules of the Second Energy Account and the Third Energy Account for plants that started operating before 30 June 2011 and 31 May 2011 respectively. This briefing examines both the simplified authorisation procedures for installing and reconstructing renewable power plants and the related 20-year feed-in and feed-in premium tariffs. The new rules confirm some specific tariff rises, including a new increase of incentive to use material made in the EU.

Introduction

On 13 May, the Ministry for Economic Development decree (Decree) of 5 May came into force. It sets out the incentives for generating electricity by photovoltaic power plants that start operating between 1 June 2011 and 31 December 2016 – the Fourth Energy Account.

The rules set out in the Second Energy Account will remain for plants that gave notice of the completion of works by 31 December 2010 and will start operating by 30 June 2011. The tariffs envisaged by the Third Energy Account will only apply to plants that start operating by 31 May 2011.

The feed-in tariffs for the Fourth Energy Account apply to natural or legal persons, public entities and co-owners of photovoltaic power plants that start operating after 31 May 2011 (following installation, total reconstruction or upgrading) and that – not having benefited from the incentives of the previous energy accounts – have the following characteristics:

  • capacity of at least 1kW;
  • meet the technical standards both in the Decree and in Legislative Decree No. 28/2011;
  • new or newly built components;
  • a single connection point to the national grid or to small power grids; and
  • with sole regard to plants located in agricultural areas, the nominal capacity of each plant must not exceed 1MW, the plants must be located at a distance of no less than 2km and the plants must not use more than 10 per cent of the agricultural land at the disposal of the installer.

The Decree sets out the expenditure limits for each six-month period up to and including 2016 for the application of incentives to integrated photovoltaic power plants with innovative features and concentrator photovoltaic power plants.

The table above shows the expenditure limits for the incentives for photovoltaic plants for 2011-2012. The limits apply to 'large' plants; ie those with a capacity of over 1MW if installed on buildings or other plants (ie not on buildings) that are not operating under the reverse metering scheme (excluding plants installed on areas or buildings belonging to the Public Administration). The limit specified will be used by Gestore dei Servizi Energetici (GSE) to compile admission lists for each six-month period, which do not operate on a rolling basis (except for plants that start operating by 31 August 2011), based on the following priorities, listed in order of importance:

  • plants that are operating on the date that the application is submitted; plants for which the installation
  • works are completed on the date that the application is submitted; and
  • non-operational plants whose installation works are not completed, if they have been duly authorised and their connection requests have been accepted by the grid operator.

Within each category, the GSE will give priority to plants on the basis of the following criteria:

  • priority of the date of the relevant authorisation;
  • lower capacity of the plant; and
  • priority of the date that the application is submitted.

The level of the feed-in tariffs is set out in annex no. 5 to the Decree. They will be granted for 20 years from when the plant starts operating and may be added to the revenue from the sale of the generated electricity, because they are granted exclusively for the production of electricity, not the sale.

For plants that start operating after 31 December 2012, the scheme has undergone some important changes. First, the feed-in premium system of 2011-2012 is replaced by a feed-in tariff scheme, in which the level of the feed-in tariff already includes the price at which GSE purchases the electricity directly from the producer operating under the scheme. Exceeding the expenditure limits in the table below (with a total of 9,770MW and at a cost of €1,361m) will no longer result in disqualification from the incentives, only a reduction in such incentives for the next six months.

Authorisations

Under Legislative Decree No. 28/2011, the installation and operation of photovoltaic power plants continues to be facilitated, including by a series of administrative measures. Indeed, applicants may use the simplified authorisation procedure (which replaced the statement of commencement of works, but follows the same lines), if the installer holds legal title to build on the area that the plants and the relevant works are installed. For integrated plants of any capacity installed on existing buildings, the surface area of the modules must not exceed that of the roof. Non-integrated plants may only use the simplified procedure if their capacity does not exceed 20kW. However, the regions and autonomous provinces can extend this threshold from a minimum of 50kW to a maximum of 1MW, as did the Abruzzo region, which raised the threshold to 1MW.

The rules on authorisations have been deregulated. The installation and operation of plants of up to 200kW, comprising modules adhering to or integrated with roofs of existing buildings (or their adjoining structures) are merely subject to a notice of commencement of works, while plants with the same slope and direction as the pitch, and whose components do not alter the outline of the buildings in question, if the surface area of the plant does not exceed that of the roof, can benefit from the notice of commencement without any capacity limitation. Even in this case, the regions and the autonomous provinces are entitled to extend the scope of application of the deregulation without any limits on capacity to integrated plants, or to non-integrated plants (eg on the ground) with a nominal capacity of up to 50kW.

There are specific rules, characterised by further simplification, for the installation of roof-top plants on newly constructed buildings or for large-scale reconstruction projects of existing buildings.

These are designed to cover the heating, electricity and airconditioning requirements of such buildings. All other types of installation of photovoltaic power plants are, in principle, subject to the single authorisation procedure.

Another change is that the power grid operators that receive requests for connecting photovoltaic power plants must obtain authorisation. In cases where works (that are not included in the connection estimates) are needed for the feed-in and off-take of electricity generated by several plants or to improve the dispatch of electricity generated by existing plants, the grid operator will be required to obtain regional authorisation for these works. The relevant regions are required to ensure that the procedures activated at the request of the grid operators are co-ordinated with the authorisation procedures for the installation and operation of the plants served by the new works effected by the grid operators.

Applications for incentives 2011-2012

Plants other than large plants, as defined by the Decree, are admitted to the incentive scheme with no cost limits.

Large plants that start operating by 31 August 2011 will be admitted directly to the incentive scheme, subject to informing the GSE that they have started operating within 15 days of doing so.

Large plants other than those in the paragraph above may only benefit from the incentives if both the following conditions are met:

  • entry in the electronic register kept by the GSE in such a way as to be included within the cost limits set out for each relevant period; and
  • the certificate of completion of works of the plant must be received by the GSE within seven months of the publication of the list or within nine months in the case of plants with a capacity exceeding 1MW.

Applications for registration may only be submitted in specific windows of time.

The lists will be published within 15 days of the closure of each period, based on the corresponding availability of photovoltaic incentives, as set out below.

Tariff increases and other forms of incentive

The feed-in tariffs may be added to investment subsidies of less than 30 or 60 per cent, depending on the type of investment and the capacity of the plant.

There is also a simplified sales procedure for plants admitted to the scheme in 2011-2012. For example, if a plant has a capacity of up to 200kW, it may benefit from reverse metering (scambio sul posto). In other words, offsetting the value of the electricity generated and injected into the grid against the value of the electricity withdrawn and used in a different period from that in which it is generated. The regulated off-take scheme (ritiro dedicato) – whereby producers sell electricity directly to GSE through a simplified sales procedure – is available to plants with a higher capacity. Producers may still sell electricity on the free market through the electricity exchange or bilateral agreements. For 2011-2012, the revenue from such sales is added to the feed-in tariffs, and from 2013, the level of the feed-in tariff will already include the price at which GSE purchases the electricity.

Roof-top plants that use the reverse metering scheme may also be granted an increase in the feed-in tariffs when they increase their energy efficiency. The tariff will be increased with half the reduction of electricity needs achieved by interventions on the outside of buildings that have produced a reduction of at least 10 per cent of the summer and winter energy performance factors. The increase may not, however, exceed 30 per cent of the basic tariff.

Roof-top plants with a capacity not exceeding 1MW may also be granted an increase in the feed-in tariffs when they increase their energy efficiency. The tariffs will be increased by 50 per cent of the reduction of electricity needs achieved by interventions on the outside of buildings that have produced a reduction of at least 10 per cent of the summer and winter energy performance factors. The increase may not, however, exceed 30 per cent of the basic tariff.

Small plants are eligible for an increase of 5 per cent in the tariff if they are installed by a municipality with a population of less than 5,000. There is a further increase of 5 eurocents/kW if, in addition to the installation of the panels, fibre cement or asbestos roofing is removed.

The tariffs are increased by 5 per cent for all plants other than those installed on buildings if they are in areas classified as industrial, commercial, exhausted quarries, dumps or contaminated sites.

There is interesting news for users of solar panels manufactured within the EU: a 10 per cent increase of the tariff for plants whose investment costs – excluding labour – account for at least 60 per cent of products made in the EU.

The Italian Energy Authority will issue one or more regulations to set out the procedures to be granted with the feed-in tariffs, the consequences related to the loss of incentives due to transmission operators' delay in connecting the plant to the electricity grid and the budgeting of the Third Energy Account through the regulated tariff 'A3'.

On 15 May, GSE also adopted the technical procedures that those responsible for large plants must comply when applying for admission to the scheme in 2011- 2012. Within two months, the Italian Energy Authority will issue measures about, among other things, the grid connection procedures in the case in which a delay caused by the operator results in a loss of the right to incentives and the budgeting of the Fourth Energy Account through the regulated tariff A3.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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