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Solar energy - tariffs to fall yet again |
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25 May 2012, 5:00 PM
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More changes to the Feed In Tariffs have been announced by the Department for Energy and Climate change. Following detailed consultation with industry and consumers, the government is introducing a range of revised tariffs with effect from 1 August.
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The government claim that the new payments will represent better value for money and allow businesses and householders to plan with confidence.
However, Ministers also announced plans to slash the payment period of the FIT scheme from 25 years to 20 for new solar installations – which will significantly eat into the potential returns in the long-term. David Hunt, from renewable energy company Eco Environments, said: “Yet again the Government stands accused of giving with one hand only to take away with the other. We are pleased that Ministers have listened to the deluge of complaints from the solar industry about the scale and speed of the cuts proposed in their consultation document earlier this year.
“But we are also disappointed that the Government still seems hell-bent on making life very difficult for the solar industry and the tens of thousands of jobs dependent on it as well as for consumers who are weighing up the pros and cons of investing in solar PV. While the return on investment remains attractive at around 6%, by reducing the FIT lifetime by five years consumers will earn approximately £20,000 less than they would have done if the 25 year term had been left in place. This is the sting in the tail that the industry and the consumer could have done without at a time when the market remains extremely fragile.”
The tariff for a small domestic solar installation will be 16p per kilowatt hour, down from 21p, and will be set to decrease on a 3 month basis thereafter, with pauses if the market slows down. All tariffs will continue to be index-linked in line with the Retail Price Index (RPI) and the export tariff will be increased from 3.2p to 4.5p.
The new tariffs should give a return on investment (ROIs) of over 6% for most typical, well-sited installations, and up to 8% for the larger bands.
Increasing numbers of installations have brought solar technology costs down over the last two years and the revised scheme is claimed to merely be taking this into account.
Alan Aldridge, Chairman of the Solar Trade Association said: “We broadly welcome many of the Government’s decisions for how solar PV will be treated in the FITs scheme and wholeheartedly welcome the inclusion of Solar in DECC's updated Renewables Roadmap; this should reassure consumers and solar companies alike that the Government recognises and stands behind a major role for the solar industry. Despite the currently slow market, the industry can have some confidence that the new Tariffs are tight but workable. Householders should be reassured the new Tariffs will provide more attractive returns than can be found elsewhere today. The STA is now keen to work with Government to get this positive message out."
Changes to solar Feed-in Tariffs: From August 1st this year...
16p/kWh for household scale solar PV installations to reflect fall in cost of the technology, delivering a return of about 6% for a typical installation. Tariffs for larger installations also to be reduced to reflect cost reductions but with most tariff cuts lower than proposed in February.
Reductions to apply to new installations from 1 August, instead of 1 July as proposed, in recognition of low uptake from 1 April and providing time for industry to adapt.
Multi installation tariff increased to 90% of standard tariff
Organisations with more than 25 solar PV installations will get 90% of the standard applicable tariff, increased from 80%, reflecting new evidence on costs involved for these projects.
Reduction in tariffs over time in line with uptake of FITs scheme
Average tariff reductions of 3.5% every 3 months, reductions will be bigger (up to 28%) if there is rapid uptake.
Tariff cuts will be skipped (for up to 2 quarters) if uptake is low.
Uptake in 3 different bands (domestic (size 0-10kW), small commercial (10-50kW) and large commercial (above 50kW and standalone installations) will determine the quarterly reductions within those bands.
Increase export tariff from 3.2p to 4.5p/kWh, to better reflect the real value of electricity exported to the grid.
RPI index-linking of generation tariffs to be retained
Scheme lifetime reduced from 25 to 20 years for new solar installations, reducing the lifetime costs of the scheme and bringing solar in line with most other technologies supported under FITs.
Tariffs for installations which do not meet the energy efficiency requirements will mirror the tariffs for standalone installations, thereby ensuring energy efficiency is still encouraged as tariffs are reduced.
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