FiT Cut partial Reprieve
In a document published this morning, the government confirmed small scale renewables will still see deep cuts, with solar feed-in tariffs falling by as much as 63.5 per cent from 8 February.
DECC confirmed it would cap annual new spending for the feed-in tariff at £100m by the end of 2018/19 as set out in the consultation. However, it said new evidence which came forward during the consultation period has allowed it to reduce the severity of planned cuts.
In a surprise move, the government also announced it would reintroduce pre-accreditation for solar PV and wind generators over 50kW, as well as all hydro and anaerobic digestion plants, after scrapping the mechanism in September.
The government said it had made the changes after listening to feedback from the public and industry.
"My priority is to ensure energy bills for hardworking families and businesses are kept as low as possible whilst ensuring there is a sensible level of support for low carbon technologies that represent value for money," said Energy and Climate Change Secretary Amber Rudd in a statement.
"We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model. When the cost of technologies come down, so should the consumer-funded support."
DECC also confirmed separately today that it will end support for all new solar farms supported through the Renewables Obligation scheme from 1 April 2016, including installations smaller than 5MW in capacity as part of its drive to trim consumer spending on renewable energy.
The feed-in tariff outcome today confirmed sub 10kW solar schemes will see payments fall by 63.5 per cent instead of the 87 per cent cut proposed in the original August consultation proposals, which industry insiders had predicted would mark the demise of the sector in the UK.
DECC said sub-10kW solar schemes will now receive 4.39 pence per kilowatt hour (kWh) in February instead of 12.03p/kWh under the current scheme.
PV systems with a capacity of 10-50kW will see their tariffs fall by nearly 58 per cent to 4.59p/kWh instead of 10.90p/kWh under the current policy.
However, despite the improvements announced today, the government's own impact assessment predicts that between 9,700 and 18,700 solar jobs could be lost as a result of the changes.
Meanwhile, the wind energy industry also saw a more favourable outcome than expected, with the government confirming sub 100kW machines will receive 8.54p/kWh in February, which represents a drop of nearly 38 per cent.
DECC also confirmed that it will retain a small level of support for turbines larger than 1.5MW, offering 0.86p/kWh instead of ending the tariff all together. However, this still represents a cut of 65 per cent from current levels.
The government said it was able to soften the cuts after receiving "robust" evidence from more than 100 respondents to the consultation on the real costs of installing renewable energy projects. It admitted the original plans, drawn up by consultancy Parsons Brinckerhoff, were based on limited data.
DECC predicts the new cuts will still enable solar schemes to secure a 4.8 per cent rate of return, with wind receiving 5.9 per cent and 9.2 per cent on offer for hydro.
The news is likely come as a relief to some parts of the renewable energy industry, as the government had threatened to close the feed-in tariff scheme altogether if it could not cap government spending on feed-in tariffs at £75m to £100m from 2016 to 2018/19.
Solar industry insiders had argued that they could become subsidy free by the end of the decade if the government retained an adequate level support for the technology over the coming years.
Paul Barwell, chief executive of the Solar Trade Association, offered a cautious welcome the changes. "Government has partially listened. 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," he said in a statement.
He said the new tariff levels were "challenging" but added that solar still could prove a good investment for some home owners.
"Our initial analysis shows solar is still worth considering if you consider the wider benefits such as the increased value to your home," he said. "Homeowners can also benefit by changing the way they use their generated electricity through higher day-time usage or via storage which is now a rapidly developing market."
Greenpeace UK energy campaigner Barbara Stoll said the government had "swapped a blunt axe for a sharp scalpel" in softening the blow to industry.
"With costs falling, demand rising, and post-Paris momentum growing, the UK solar sector will see off the government's attacks," she said. "The question is how many more jobs, investments, and business opportunities are we wasting because of George Osborne's incoherent policies.
"If the government is as committed as it claims to be to the Paris climate deal, then solar is one of the cheapest and safest way for the UK to deliver on it."
Green MP Caroline Lucas welcomed the government's changes, but warned they were still "deeply damaging".
"Rather than really rethinking these disastrous and deeply unpopular plans ministers will inflict serious damage on an industry which creates thousands of jobs and is a vital part of a zero carbon future," she said.
"The Government's strong words on climate change ahead of the Paris summit are being revealed to be nothing short of bluster and spin. Ministers happily take credit for being being climate champions on an international stage while flagrantly undermining the renewable industry here at home.
"Solar is popular and cost effective- and the price is rapidly dropping. To cut support at this stage not only dashes hopes of Britain leading the way in meeting the 1.5 degree target set in Paris last week, but also risks putting thousands of people of of work."
The STA's Barwell said the new incentive levels meant that solar was likely to remain a good investment for business customers, particularly given the reintroduction of pre-accreditation, which makes it easier for firms to confirm the level of support they will receive for larger projects, and growing corporate adoption of decarbonisation strategies in the wake of the Paris Agreement.
"Commercial rooftop solar has been a small but growing part of the solar rooftop market," he said. "However, even with these lower tariffs, the nature of high electricity self-consumption and a maturing commercial market should ensure solar is still a good choice for many power-hungry businesses across the UK looking to reduce their bills and use the empty space on their roofs."
However, the trade body also voiced concerns at the introduction of a new "cost control" mechanism that puts a cap on the amount of solar that can be deloyed each quarter. It warned that unless the new mechanism is well married it could lead to the emergence of a "stop-start" market.