Feed-in tariff cut shocks UK PV market

British officials today announced the cutting of support for large-scale (greater than 50 kilowatts) solar photovoltaic (PV) installations supported by the government’s feed-in tariff (FIT). This news has been expected for some time, as the government announced the FIT review in February. However, it’s still a shock for the fledgling UK solar PV market.

The rapid review of the FIT has been focused on reducing tariffs for over 50-kilowatt solar PV and also increasing support for farm-scale anaerobic digestion installations. This is due to the government’s perception that large-scale solar poses a threat that was not expected.

“I want to make sure that we capture the benefits of fast falling costs in solar technology, to allow even more homes to benefit from feed-in tariffs, rather than see that money go in bumper profits to a small number of big investors,” said Climate Change Minister Greg Barker.

The previous tariff rates for solar PV were:

• 32.9p/kilowatt-hour for installations of 10 to 100 kilowatts
• 30.7p/kilowatt-hour for 100-kilowatt to 5-megawatt and stand-alone installations

Following today’s announcement, the proposed tariffs for solar PV are:

• 19p/kilowatt-hour for 50- to 150-kilowatt installations
• 15p/kilowatt-hour for installations of 150 to 250 kilowatts
• 8.5p/kilowatt-hour for 250-kilowatt to 5-megawatt and stand-alone installations

With such a marked differences between the before and after tariff rates, this will hurt many of the planned large-scale solar PV plants currently in planning stages. The government reasons that the changes are in line with amendments made to similar schemes in Europe, such as Germany, France and Spain. However, the scale of those markets is completely different, with the solar PV industries in those countries producing hundreds or thousands of megawatts each year, allowing installation costs to be much lower. Because of the immaturity of the UK market, the incentive rates must be higher to encourage rapid growth.

The announcement has been met with widespread condemnation from the solar PV industry.

Andrew Lee, head of international sales at Sharp Solar, said it is “extremely disappointing and effectively destroys the solar industry for installations above 50 kilowatts … this overzealous proposal will wipe out community projects like installations on schools, hospitals and churches, will halt business and industrial investment, and will limit solar to small-scale domestic projects. This is terrible news for the renewable energy sector — the steep rise in job creation will stop and morale within the industry will drop as a result of this remarkable U-turn.”

Such strong words indicate just how heavily these tariff cuts will weigh on the industry, forcing investors to look abroad and reducing the ability of the UK to meet ambitious renewable energy targets.

If approved by parliament, the revised tariffs would be introduced as soon as 1 August 2011, which could spur a rush in these next few months, but then effectively kill the UK large-scale solar industry before it has grown. Furthermore, if you look at other countries with the FIT in place, such as Germany, where 5- and 10-megawatt installations are relatively average, it is remarkable that the UK government even considers installations greater than 50 kilowatts in size to be “large.”

The fast-track review has also modified the tariff rates for anaerobic digestion (AD), as uptake for such systems was previously too slow, with just two installations so far. The adjusted rates are set to be:

• 14p/kilowatt-hour for AD installations with a total capacity of up to 250 kilowatts
• 13p/kilowatt-hour for AD installations with a total capacity of between 250 to 500 kilowatts

These compare with the previous tariff rates of 12.1p/kilowatt-hour for AD installation of up to 500 kilowatts. However, the government is also looking at restraining the growth of energy crops for AD purposes and focusing on using waste as the input. Officials are talking to the Department for Environment, Food and Rural Affairs to implement controls in this regard.

While the previously described changes to the UK FIT are the first to be implemented, a further comprehensive review of the whole scheme is currently underway and set to be finished by the end of this year.

The results of this review has left the UK solar PV industry shell-shocked. It’s likely to prevent the uptake of solar PV on a large scale, which means the potential carbon savings from this technology has also been cut. While there have been more than 23,000 installations since the FIT was introduced 11 months ago, these have been mainly domestic. The total installed capacity from solar PV has been just 64 megawatts, a scale likely to have very little impact in the quest for a low-carbon future. Today’s announcement leaves Britain’s hopes for a significant contribution from solar PV severely dented.

Greenbang will be providing further analysis of the feed-in tariff and the effects of the  fast-track review on the UK solar PV and AD markets during a webinar at 2 pm GMT on Wednesday, March 23. Registration for “Analysis of the feed-in tariff 2011” is free and available online.