Energy industry split over support scheme review
The renewable energy industry has been left divided by the government’s decision last week to review the Feed-in Tariff (FiT) support scheme ahead of schedule.
Energy secretary Chris Huhne announced there would be a “fast-track” review of payment rates for solar projects more than 50kW and rates for farm-based anaerobic digestion (AD). He said there would also be a longer-term review of all aspects of the FiT scheme, including tariff levels, administration and eligibility of technologies.
It is widely anticipated that the review will result in less support for larger solar PV projects to prevent a feared surge in development of field-scale solar parks, but rates for farm-based biogas production from AD could get a much-needed boost.
“We’re aware the system for supporting farm-based AD hasn’t been giving the support needed to take this sector forward,” Minister of State for Climate Change, Greg Barker, told Farmers Weekly on Tuesday (15 February).
“Since FiTs were introduced last year, only two farm-based AD plants have come online, so we are going to carry out this fast-track review to see what we can do to help the sector. FiTs will be the first place to start, but this will work hand-in-glove with the Renewable Heat Incentive.”
Although FiTs are funded through higher electricity bills rather than the government’s own coffers, the tighter economic conditions and pressure on household budgets meant that the government had to show greater responsibility for how any funding was allocated, he said.
“Solar is by far the most expensive technology to subsidise and we’re concerned that what’s in the pipeline could take a disproportionate amount of funding. These are difficult choices, but we have to make sure we manage the money in a responsible way. People also appreciate the wider benefits of AD in reducing artificial fertiliser use and encouraging waste and resource efficiency, so if we can make farmers more self-sufficient and produce green energy at the same time, it’s a win-win.”
However, many industry experts fear the uncertainty created by the review, which comes just 10 months after the FiT scheme was launched, could stifle investment in renewable energy and create a lack of trust in the whole FiT system.
“Developers of PV installations upwards of 50kW, will be left hanging in the air,” Gaynor Hartnell from the Renewable Energy Association said. “Bands up to 4kW can be more confident tariff levels will remain unchanged until April next year, but developers of schemes from 10kW to 50kW in particular will be wondering how the announcement applies to them.
“Department of Energy and Climate Change (DECC) expresses concern about field arrays but it is fast-tracking far more than the stand-alone field arrays. In our view this has escalated the uncertainty.”
NFU chief renewable energy adviser Jonathan Scurlock said that including all solar projects more than 50kW in the review would affect many agricultural rooftop projects in the 10-100kW FiT payment range.
“It is imperative that the government announces its timetable for any proposed changes, and the transitional rules that will apply to avoid a collapse in confidence among investors,” he said.
“This hardly seems like the right way to reward the success that the FiTs had achieved so far, in bringing new sources of investment into land-based renewables.”
Dr Scurlock welcomed the review of rates for farm-scale AD, but called for a clear timetable to be set out so projects already in development were not stalled. “Improved Feed-in Tariffs for farm-based AD will help to solve many of the outstanding issues for the farm and rural sector contained within the development of the current AD Strategy.
“However, there are worries now that projects currently under development will be stalled pending the introduction of a new tariff regime. To address this, we will be calling upon the government to backdate any FiTs uplift to February: this will have negligible cost, since so few on-farm AD projects have actually progressed to date.”
What’s happening?
On 7 February, energy secretary Chris Huhne announced the first review of the Feed-in Tariffs scheme for small scale low carbon electricity generation. It will determine how the efficiency of FiTs will be improved to deliver £40m of savings (10%) in 2014/15.
All aspects of the scheme are covered, including:
• Tariff levels
• Degression rates and methods
• Eligible technologies
• Arrangements for exports
• Administrative and regulatory arrangements
• Interaction with other policies
• Accreditation and certification
The review includes fast-track consideration of large scale solar photovoltaic projects more than 50kW and a short study into the uptake of FiTs for farm based anaerobic digestion plants.
The government says it will not act retrospectively and any changes to generation tariffs will only affect new entrants into the FiTs scheme. Installations which are already accredited will not be affected.
Why now?
DECC is concerned that current payment rates encourage the development of large scale solar parks, which could push FiT costs off track and “soak up” money intended for smaller scale domestic and small business projects. It is also worried by the lack of uptake of farm-based anaerobic digestion – only two such projects have been accredited so far under the scheme.
Last year’s Spending Review committed government to save 10% of the costs of FiTs in 2014-15 through a review due to start in 2012 or earlier if uptake exceeded expectations.
What’s the timescale?
It is expected that any changes made following the fast-track review of solar PV and AD tariffs could be made “as soon as practical” – possibly before the parliamentary recess in July, but further consultation or possible legal challenge could delay the decision into the autumn.
A consultation will be published in March. The full review of FiTs will be completed by the end of 2011, with tariffs remaining unchanged until April 2012, unless the review reveals a need for greater urgency.
Next month the government also hopes to publish measures to support renewable heat.
Have your say
DECC wants to hear stakeholders’ views about specific issues that could be considered as part of the review. Email rfi@decc.gsi.gov.uk. There will be further consultation later in the year.
Total installations
More than 21,000 installations have been registered under the Feed-in Tariff scheme (as at 26 January), with combined capacity of 76.66MW. Most are domestic installations. The number of projects in each technology type is as follows:
• Anaerobic digestion – 2
• Hydro – 178
• Micro CHP – 36
• Solar PV – 19,854
• Wind – 1132
Source: Ofgem
Industry reaction
“The announcement by government that it is reviewing the levels of FiT for farm AD is hugely welcomed. This sector has a vital role in meeting renewables targets and reducing emissions – and an expansion in biogas plants will contribute to farm profitability, job creation and the local community.” David Collins, biogas adviser, Renewable Energy Association
“In times of economic crisis, it is essential to encourage the development of a promising sector such as photovoltaic’s The UK should raise its ambition and widely deploy PV. According to estimates by EPIA, UK has been identified as having the fifth largest technical potential for PV in Europe.” Eleni Despotou, secretary general, European Photovoltaic Industry Association
“The major problem that the government is likely to create by the Minister’s (Geoff Huhne) comments could be a complete lack of trust in the UK FiT system. It may have been simpler for DECC to have set the maximum size of installation under the FiT at about 1MW rather than 5MW. Although the government would then have found that there would be no benefit from economies of scale and that would have had the net affect of stymieing the technologies’ deployment – but is that really what the government is seeking to achieve?” Andrew Watkin, head of energy, Carter Jonas
“The review should see an increase in the amount farmers receive for the electricity they produce through AD. The current payments are too low and we have found that farm-scale AD is out of reach for most farmers. We anticipate a renewed interest by farmers and investors in this area by the end of the year. The review of Feed-in Tariffs for larger scale PV does not send out a positive message for investing in renewables if the government are going to change payments at short notice.” Mark Newton, Fisher German
“We have spoken to a number of [solar PV] developers who remain positive. Many of them believe this announcement will lead to the rationalisation of the sector, ensuring only those sites that are both well suited and well promoted will ever be successful. It is anticipated that this will result in many of the speculative and lower quality developers to leave the sector leaving a higher quality core.” George Matts, Samuel Rose