Solar industry faces dramatic cuts to support

Plans to slash the support for solar electricity technology have been announced by the government today (31 October).

The reduced Feed-in Tariffs affect new domestic and larger installations from 1 April 2012, although rates for the largest systems (250kW-5MW) have been left untouched as these have already been dramatically reduced during the “fast-track” review earlier in the year.

It is proposed to cut the tariff for schemes up to 4kW in size from 43.3p/kWh to 21p/kWh, while rates for schemes between 4kW and 50kW will be more than halved. Rates for systems up to 250kW will also be cut significantly if the proposals go ahead.

The new proposed tariffs would apply to all new solar PV installations with an eligibility date on or after 12 December 2011. Such installations would receive the current tariff before moving to the lower tariffs on 1 April 2012. Consumers who already receive FiTs will see their existing payments unchanged, and those with an eligibility date on or before 12 December will receive the current rates for 25 years.

Climate change and energy minister Greg Barker said the cuts were urgently needed to avoid “boom and bust” and protect the wider Feed-in Tariff scheme, which faced budgetary pressure.

“Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year,” he said.

“The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FiTs scheme.”

The Department of Energy and Climate Change estimated that the average cost of a domestic solar PV installation had fallen by at least 30% since the start of the scheme, from around £13,000 in April 2010 to £9,000 now.

If no action was taken, it said FiTs for solar PV would be costing consumers £980m a year by 2014-15, adding around £26 (at 2010 prices) to annual domestic electricity bills in 2020. The proposals would restrict FiTs PV costs to between £250-280m in 2014-15, reducing the impacts of FiTs expenditure on PV on domestic electricity bills by around £23 (2010 prices) in 2020.

The consultation is the first of two on the comprehensive review of FiTs. DECC will publish a separate consultation around the end of this year, which will consider other aspects of the scheme, including tariffs for other technologies. The consultation closes on 23 December 2011.

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