On 9th February 2011, the Government published its response to the first phase of the comprehensive tariff review of the Feed-in Tariffs ("FITs") scheme and two further consultations on further changes to the FITs.
Government Response to Consultation on Comprehensive Review Phase 1
Cuts to Solar FITs
In its response to the October 2011 consultation on FITs for solar PV the Department of Energy and Climate Change (DECC) has published the final decisions on the details of the tariffs, the new energy efficiency requirement, and of the new multi-installation tariff rates. The draft licence modifications instrument implementing these changes was laid before Parliament on 9 February 2012.
The new tariffs are due to come into effect from 1 April 2012, subject to Parliamentary scrutiny as required by the Energy Act 2008 and will apply to solar PV installations with an eligibility date on or after 3 March 2012.
The Government has reserved its rights to cut FITs for installation with an eligibility date between 12 December 2011 and 3 March 2012 subject to the outcome of the legal proceedings and Parliamentary procedure in the Energy Act 2008. The Government has until 21 February 2012 to lodge its appeal in the Supreme Court against the decision of the Court of Appeal.
'Multi-installation' Tariff
A new 'multi-installation' tariff will apply for new solar PV installations with an eligibility date on or after 1 April 2012 where the FIT generator or nominated recipient owns or receives FITs payments for more than 25 solar PV installations. This 'multi-installation' tariff will be 80% of the standard tariff applicable to that installation and the rate will not be increased in the event that the FITs payments are subsequently transferred to an entity that does not meet the 'multi-installer' criteria.
Energy Efficiency Requirements
From the 1st April 2012 to qualify for higher rate FITs, all new solar PV installations attached or wired to provide electricity to a building will have to satisfy that the building holds an Energy Efficiency Certificate rating of 'D' or above. Subject to very limited exceptions, failure to meet this requirement will result in the installation being eligible only for a lower tariff rate of 9p/kWh as from 1 April 2012.
Two further consultations on the FITs Scheme were also announced: a consultation on Solar PV cost control and a consultation on tariffs for non-PV technologies and scheme administration issues. The consultations close on 3 April 2012 and 26 April 2012 respectively.
Consultation on Comprehensive Review Phase 2A: Solar PV cost control
Further cuts to Solar FITs
The Government has proposed further cuts to solar PV tariffs for solar PV installations with an eligibility date on or after 1 July 2012. This new tariff will depend on the rate of deployment of solar installations in March and April 2012 (and includes three additional options for new solar PV installations of ≤4 kW capacity. In setting the new tariffs the Government proposes that the tariffs that would broadly deliver 4.5% - 8% return on investment. This, in the Government's view would "remove the need for emergency reviews" and make way for a "stable, predictable future for solar PV and for the whole FITs scheme". Further cuts to Solar PV are proposed in the Phase 2B consultation document.
Tariffs for 'multiple installations' and stand-alone solar PV installations would be lower that these standard tariff rates in line with the licence modifications outlined above.
Tariff degression mechanism
DECC is also consulting on its proposed mechanism for changing tariffs after 1 July 2012. The Government's preferred mechanism would be to have automatic baseline degression with ability to bring forward the degression steps if deployment exceeds pre-determined levels and an annual check.
The baseline degression is proposed at 5% reduction in October 2012, followed by subsequent reductions of 10% every 6 months. A contingent degression mechanism would apply if the actual deployment levels exceed the expected deployment by 125% before the date of the relevant baseline degression. This degression mechanism and the contingent degression mechanisms may be reviewed when the tariffs reach 2 ROCs.
Tariff Lifetime
The Government also proposes to reduce the tariff lifetime for all new solar PV installations from 25 years to 20 years. If adopted, the reduced period would run from the date of implementation of the Phase 2A consultation.
Consultation on Comprehensive Review Phase 2B: Tariffs for non-PV technologies and scheme administration issues
Tariff Levels for Anaerobic Digestion, Wind, Hydro and MicroCHP projects
The Government is consulting on a new FITs levels to take effect from 1 October 2012. The upper limit of support provided under FITs is proposed to be capped at 21p/kWh for generation tariffs and for the following tariffs to apply for the following technologies:
Anaerobic Digestion: The Government intends to freeze tariffs for AD up to 500kW capacity installations, subject to a rise in line with RPI in April 2012. AD installations above 500kW would be subject to the 2ROC equivalent level (currently, 9.0p/kWh).
Wind: The Government has re-based the tariffs for wind installations that are eligible for FITs (i.e. below 5 MW) based on its updated analysis of costs and performance. The consultation sets the following bands:
- for up to 100kW wind installations, the tariffs would be capped at 21p/kWh;
- for wind installations above 1.5MW and below 5 MW the tariff will remain unchanged at 1 ROC equivalent level (currently 4.5 p/kWh), with the banding to be adjusted in accordance with the current RO banding.
Hydro: There are no short term proposals to amend the tariff rate for hydro project save for the 21p/kWh cap. Installations of 2-5MW capacity would receive 1 ROC equivalent (currently 4.5p/kWh), subject to the current RO banding review.
MicroCHP: The Government has proposed to raise the tariff level for MicroCHP to 12.5p/kWh due to the high manufacturing costs of this technology.
This consultation also outlines the Governments proposals to set an automatic degression rate of no less than 5% per year from April 2014. This would include capacity based triggers to accelerate degression steps, based on three months notice periods.
The Government is proposing further cuts to solar FITs from October 2012. It proposes to cut the solar PV tariff for non-'community-owned' multi-installations to the level equivalent to the stand-alone tariff (currently 8.9p/kWh). Social housing, community projects and distributed energy schemes would be exempt from these multi-installation tariff rates and would continue to receive a tariff of 80% of that offered to generators with up to 25 solar PV installations.
Further Information
- To view DECC's press release and for links to the consultation documents, please click here
- To read our previous Law-Now on the First Review of Feed-in
Tariffs, please
click here
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/02/2012.
