The Government has today (17 December 2015) published its decisions on the wide-ranging review of the Feed-in Tariff (FiT) scheme that was launched in August.
The Department of Energy and Climate Change (DECC) has softened its proposals a little. For example, the cuts to the tariffs for small-scale roof-top solar are (marginally) less severe, and the export tariff has (not yet) been cut. However, any such softening is mere window dressing - the extent and severity of the changes cannot be denied.
In this note, WLG's energy experts summarise the key outcomes of the review.
Generation Tariff Cuts
In its consultation DECC stated that the cost of FiTs was set to contribute to the Levy Control Framework (LCF) caps being exceeded - the LCF controls the amount consumers pay on their energy bills towards low-carbon power generation.
For the most part, DECC has (marginally) reduced the severity of the cuts. However, standalone solar PV generators are even worse off than originally proposed.
||Current 2016 Tariff
||Tariff proposed in consultation
||Decision tariff (effective from January 2016)
||5.73 - 12.03
|10 - 50kW
||5.73 - 10.90
|50 - 250kW
||5.73 - 9.29
||5.89 - 10.85
||14.43 - 15.45
Government has decided to control FiT expenditure by pressing ahead with quarterly deployment caps, which will apply to new installations applying for FiTs on or after 15 January 2016 (effective from 8 February 2016).
The proposed caps are guided by the following key principle:
By April 2019 FiT spending should be no more than £100 million per year in respect of installations commissioned from February 2016.
Ofgem will be tasked with tracking actual deployment levels. If a deployment cap is exceeded, no further accreditations will be issued in the relevant period. A queuing system will then apply, with applicants' FiT applications frozen in line until the next cap opens (although there is no guarantee of FiT support until they qualify under a cap). If a cap is not reached, unused capacity will be rolled over to the next cap, with biannual reconciliations resulting in top-ups to deployment caps.
Guidance from Ofgem is promised shortly, which will provide further details on how the caps will apply in practice. The bottom line, though, is that there is no longer a guarantee of obtaining support at a particular level - or at all - even if the installation is commissioned within the relevant window.
Default degression (degression rates set in advance taking into account projected costs of installations and bill savings) will be retained.
In addition, the Government has also decided to implement a contingent degression mechanism for all technologies. This concept previously applied only to solar PV.
No change to export tariff
The export tariff will remain in place, unaltered. The proposed shift to Consumer Price Index (CPI) from Retail Price Index (RPI) indexation has been dropped, and there is no change to reflect current wholesale prices.
While this no doubt offers some respite for developers, it seems somewhat illogical given the intended purpose of the export tariff and its current level relative to wholesale prices. One cannot help but speculate that the export tariff is not taken into account by the LCF.
DECC has indicated that it will publish a detailed consultation on the export tariff in the near future.
Extensions lose generation tariff support
From 15 January 2016, FiT installations which extend their capacity will no longer be able to obtain the generation tariff for the extension.
Reintroduction of pre-accreditation
When abolishing pre-accreditation earlier this autumn, Government said it would consider its re-introduction if the proposed new cost control measures it proposed in the summer would be effective in limiting future impacts on consumer bills.
The Government has undertaken that analysis and consequently agreed to the reintroduction of pre-accreditation from 8 February 2016.
"Pause" of FiTs
As part of the implementation of the Government's decisions, no new accreditations will be permitted between 15 January 2016 and 8 February 2016 (other than those who already had pre-accreditation prior to 1 October 2015).
These timings are driven by the legislative timetable. The amendments to the FIT Order need to be laid in Parliament only 21 days prior to the date they take effect; whereas the modifications to the Supply Licence Conditions require 40 days.
Overseas renewable electricity purchases and FiT levelisation
When calculating a supplier's market share contribution to the FiT Scheme as part of the levelisation process, the amount of electricity supplied to customers in Great Britain by that supplier is taken into account (less any electricity sourced from renewable sources outside of the UK and supplied to GB consumers). Suppliers have therefore increasingly sourced renewable electricity from overseas as a cost effective way of limiting their FiT contribution.
Government has decided, effective from 1 April 2016, to limit the amount of overseas renewable electricity deducted to electricity (1) generated in EU Member States; (2) which would have been eligible to apply for FiTs if commissioned in the UK (i.e. it would need to have been commissioned on or after 1 April 2010 with a capacity of less than or equal to 5MW); and (3) capping the amount of electricity eligible for the exemption in a FiT year from 2016/2017.