DECC shuffles FiT deck

The Department of Energy and Climate Change will cap total feed-in tariff spending for small-scale renewables at £100m from February 2016 until April 2019.

Under measures announced in today’s response to its August FiT consultation, DECC will introduce a system of quarterly deployment caps and degression bands for different technologies.

DECC will introduce measures to pause new applications to the FIT scheme from 15 January to 8 February to allow time for the implementation of cost control measures.

Deployment will be tracked by Ofgem based on the total installed capacity of new installations registered on the Microgeneration Certification Scheme (MCS) database on or after 15 January and Ofgem’s records of applications for ROO-FIT accreditation received on or after 15 January and ROO-FIT pre-accreditation received on or after 8 February.

A queuing system will be introduced for applicants who miss out on a cap, meaning their applications for FITs accreditation are frozen and they have a place in the queue when the next cap opens.

For the most part, tariff levels have been revised upwards from August’s consultation. The FiT for wind turbines of 100-1500kW has been set at 5.46p/KWh up from the proposed 4.52p/KWh, while 50-100kW wind has increased from 4.52p/KWh to 8.54p/KWh.

Turbines of 1.5MW and above will now be eligible for a tariff of 0.86p/KWh having previously been set a zero tariff rate.

Trade body RenewableUK said it was pleased to see its requests for the introduction of a specific level of financial support for 50-100kW wind turbines and re-introduction of pre-accreditation had been accepted by ministers.

R-UK chief executive Maria McCaffery was less enamoured, however, with the introduction of quarterly caps.

"We do have concerns about the use of deployment caps and the pace of degression rates, as these may limit the abilities of homeowners, farmers and small businesses to get involved in generating their own power, and secure ongoing cost reduction," she said.   

DECC expects the new tariffs will still enable solar PV schemes to secure a 4.8% return, with wind receiving 5.9% and 9.2% for hydro.

The Solar Trade Association said it is concerned that the quarterly caps could lead to "very damaging" stop-starts in the market although it acknowledged DECC had taken on board requests for unused capacity to be recycled from one quarter to another and a queuing system.

"“Government has partially listened," said STA chief executive Paul Barwell. "It’s not what we needed, but it’s better than the original proposals, and we will continue to push for a better deal for what will inevitably be a more consolidated industry with fewer companies.”

The policy's impact assessment forecasts 9,700 and 18,700 solar jobs could be lost as a result of the changes.

The Renewable Energy Association hailed the final outcome as "an improvement", saying the tariffs could provide "the base to get to post-subsidy".

REA chief executive Nina Skorupska said: “The past six months have been challenging for our members and the renewables industry, but we now have to draw a line and turn our attention to building a stable, robust and enduring industry leading to a business built without subsidy."  

DECC has also announced it will close the Renewables Obligation to new solar PV capacity at 5MW and below from 1 April 2016.

The government will also introduce grace period arrangements to protect solar RO developers who made a significant financial commitment on or before 22 July 2015 and developers who experience grid delay beyond their control.

It will also remove grandfathering from 22 July 2015 for solar projects in England and Wales with an exception for those which meet the significant financial commitment criteria as of 22 July. DECC will conduct solar-specific banding review in England and Wales and consult on new bands for 2016/17.

The announcements give a total reduction of £500m-£600m from the Levy Control Framework overspend.

Image: US DoE