Shaky Future Ahead for Green Energy in the UK

Less than a week after the historic climate agreement was agreed in Paris, DECC has published its response to the Feed-in Tariff consultation, the content of which highlights again the UK government’s lack of commitment to the green economy. The results of the Feed in Tariff consultation provide little support or encouragement for communities attempting to install rooftop solar on community buildings including schools and community scale hydro schemes.

Cognitive dissonance – or cant hypocrisy?

There is a clear disparity forming between the government’s words on the environment and their actions. David Cameron, at the Paris ‘COP 21’ Climate Summit on the 30th of November, said:

“Let’s just imagine for a moment what we would have to say to our grandchildren if we failed. We would have to say, it was all too difficult.” David Cameron.

Only for the Department of Energy and Climate Change (17th of December) to unveil “New measures to deal with the projected over-allocation of renewable energy subsidies have been announced today.”

The FIT review consultation received over 2,500 unique responses and was subject to considerable lobbying effort from communities, stakeholders and businesses across the country.

Key decisions include:

• The budget for FITs to April 2019 is up to £100m of new spend from January 2016
• There is no separate tariff for community energy but this is to be kept under review
• New tariffs will come into force on 8 February 2016 (table of new tariffs below)
• Under new tariffs, Government is targeting a 4.8% rate of return for solar, 5.9% for wind, and 9.2% for hydro
• The export tariff has been maintained at 4.85p/kWh
• DECC has sustained the link with Retail Price Index (RPI) inflation link for export and generation tariffs (rather than Consumer Price Index as proposed)
• A quarterly deployment cap system will be introduced, with a queuing system for applicants who miss out on a quarterly cap. Some of the deployment caps are very low i.e. only an estimated 70 rooftops over 50kW per quarter will be allowed in 2016
• Only one degression threshold will be implemented at the level of each quarterly cap.  The new rate will be a flat 10% if the cap is hit
• The first cap period will run from 8 February to 31 March 2016
• Pre-accreditation will be re-introduced for solar and wind over 50kW and all AD and hydro projects with an additional 6 months for community energy projects from 8 February
• Pre-registration will not be re-introduced at this stage. It may be re-introduced if an implementable system can be devised which delivers cost control and reduces gaming. DECC will issue an update early next year
• FiT will be removed on extensions for all installations commissioned on or after 15 January

Table of new tariffs:

A pause to the FiTs scheme will be implemented from the 15th of January 2016 to the 8th of February 2016 when the new tariff and deployment caps will be put in place. During the pause, no new installations will be accredited for FITs except for those with pre-accreditation granted before 1 October 2015 who are applying for accreditation within the period of validity of the pre accreditation. Installations which commission and apply for FITs during the pause will be in the queue when the new deployment caps and tariffs come into force on 8 February 2016.

Is Ambergate hydro viable?

Amber and Derwent Valley Community Energy – ADVyCE – are taking another look at their viability figures and will take their time to decide whether to proceed with the Ambergate Hydro project or to call it a day in the face of untenable financial projections. The good news for them was the re-introduction of pre-accreditation meaning some certainty when planning future income whilst the fund-raising, building and commissioning takes place. On the down side, the Feed in Tariffs have been cut more severely than outlined in the consultation document. These balancing factors make it a border line decision.

In detail:

• The feasibility study carried out in April 2015 projected a FiT rate of 16.1p/kWh. If ADVyCE were able to proceed with Pre-Accreditation by mid-2016 the new FiT would be 8.39p/kWh, a reduction of 48%.
• Critical to the future of the project would be any additional requirements or conditions  of the Environment Agency, the terms of the land lease and the price we would be able to sell the electricity generated.
• Supporting the governments Consultation decisions is an Impact Assessment.
• The key ‘non-monetised’ costs identified are Job Losses and Air Pollution due to more fossil fuel usage but there is no mention of climate change impacts.
• The Impact Assessment also agrees with the British Hydro Association that Capital Costs and Operational Costs for Hydro needed raising in their calculations, but still reduced the FiT even further with no explanation or justification.

Community Energy England – the body that represents community energy companies such as ADVyCE – expressed their disappointment:

“The results of the Feed in Tariff consultation provides little support or encouragement for communities attempting to install rooftop solar on community buildings including schools and community scale hydro schemes.”

Commenting on the outcome of the FITs consultation issued earlier today, Community Energy England CEO Emma Bridge said:

“The re-introduction of pre-accreditation for rooftop solar schemes over 50kW is welcome but overall we are very disappointed by the outcome of this consultation and the prospects for the community energy sector. Community owned schemes are accustomed to offering additional benefits such as reduced price electricity to schools and creating local funds for alleviation of fuel poverty.”

Solar PV still good value

For individual householders solar pv remains good value but restrictions on the amount of new installations and a 10% reduction in FiT rates each quarter mean this will be less and less attractive as time goes by. At 8th February a 4 kW solar pv system costing around £4,500 will bring in almost £200 per year through the new lower Feed in Tariff, around £100 per year from the export tariff and, if used wisely, around £300 savings in paid for electricity. Thus the payback period will be around 8 years – still not bad but get it while you can.

by David George