Good News for Renewables in Government Spending Review

Following yesterday's Comprehensive Spending Review, the Government announced that the Solar PV Feed-in Tariff scheme and the rates paid to owners of solar panels will remain at current levels until 2012 and then be reduced by 9% for new entrants to the Scheme, as planned. A review of the scheme, already scheduled to take place in 2012, will set out Tariff rates for 2013 and beyond.

This article in the Guardian yesterday summarises how the Spending Review announcements affect Feed-in Tariffs for Solar Panel owners:

What did the government say in the spending review about the tariffs?

The Department of Energy and Climate Change (Decc) said:

‘Feed-in tariffs will be refocused on the most cost-effective technologies saving £40m in 2014-15. The changes will be implemented at the first scheduled review of tariffs [in 2012, to kick in 2013] unless higher than expected deployment requires an early review.’

In other words, the feed-in tariff scheme and current rate paid to owners of solar panels remains the same. But there are two new elements here.

Firstly, in the 2012 review, changes will be made to the tariff that cut it by £40m, or 10%, in 2014 and 2015. Those changes won't be announced until 2012, but could take the form of both a 'trigger point' where rates paid fall automatically if a certain number of solar panels and other forms of 'microgeneration' are installed, and a potential cut in rates paid to one or more of the four technologies covered by the scheme.

Second, the government is now saying it reserves the right to bring forward that 2012 review if there's a rush of people and companies installing microgeneration between now and then.

What would this trigger point look like?

Decc isn't saying, and won't tell us until 2012. The cap could be on the total installed capacity (i.e. in megawatts) or the number of applications, or other criteria. When the government does tell us more, it will then need to consult on the proposals, because the legislation underpinning the feed-in tariffs doesn't include any mention of a cap on volume.

When should I install?

As soon as possible. The rate of 41.3p per unit of electricity for solar panel owners was always only going to be guaranteed until 31 March 2012 and then reviewed in 2013 before decreasing in the following years.

However, what was new in today's announcement was an admission that "higher than expected deployment" – ie a rush of people fitting solar and wind – would lead to that 2013 review taking place earlier. So if thousands of people suddenly decided to install solar panels over the next year, the rate could be cut much earlier than 31 March 2012. Just how much "higher than expected" the rush would need to be to bring forward the review has not been revealed.

How does this affect people who have already installed since April?
It doesn't. Any householder who installed solar panels after 15 July 2009 will still be paid 41.3p per unit of electricity for 25 years, and those before that date will get just 9p per unit.

Remember that the rate you receive from the Feed-in Tariffs for each unit of electricity you generate from your eligible Solar PV panels is fixed for 25 years and the rate is determined by the current rate when you join the scheme. The rate of 41.3p/kWh is set for new entrants to the scheme joining before April 2012, after that date new entrants will receive a lower amount. So, to secure the best feed-in tariff rates, you need to act sooner rather than later.

This entry was posted in Feed in Tariffs, Legislation.