Incentives fire up UK solar market

The introduction of the feed-in tariff (FIT) incentive policy on 1 April has sparked an explosive reaction in the UK renewable energy market with solar leading the way in installations, according to a new Greenbang research report titled, “The UK’s Feed-in Tariff: Impact, response and market trends for the decade ahead.”

Greenbang will also be hosting a free webinar on “Analysis of the feed-in tariff 2011” from 2 to 3 pm GMT Wednesday, March 23. Attendance is limited to the first 100 who register, so be sure to sign up soon. Online registration is available here.

In just six months since the tariff was introduced, over 10,000 solar photovoltaic (PV) installations were recorded, with the majority consisting of domestic installations. This has led to an increase of twice the installed capacity over 2009 in this period of time, demonstrating the positive effect the feed-in tariff has had on the UK solar market.

Other technologies supported by the scheme (wind and hydro-electric) are catching up in terms of installed capacity, though greater regulations and planning slowed the initial response.

The key period of growth is within the first two years as this is the period when the tariff rate is at its highest.

The feed-in tariff works by offering owners of renewable energy systems of up to 5 megawatts in size money for the electricity produced and also exported to the grid. There are different tariff rates for each technology according to the relative expense of the systems, with solar PV installations receiving the most due to the high cost per kilowatt-hour associated with the technology.

However, the renewable energy market has not been able to tap the feed-in tariff’s full potential, says Raphael Raggatt, the report’s lead author.

“There is a need to increase the skills base, especially for the small-scale wind and hydro markets in order to gain the most from the critical first two years of the scheme,” he says. “It is vital that companies invest heavily in R&D in order to reduce costs in line with annual tariff reductions after the first two years.”

The feed-in tariff has had the least impact on the UK’s anaerobic digestion (AD) market, as many in the industry believe the tariff at 9p/kWh is too low and the ROCs (Renewable Obligation Certificates) offer a better deal for the larger installations. Raggatt says the government should look at the effectiveness of the FIT policy on the AD market in the first review after the initial two-year growth period and look to increase the rate to ensure all of the technologies are set to benefit from the scheme.

One of the main industries to benefit from the FIT is the agricultural industry, which, with large areas of land, can exploit each of the relevant technologies supported by the scheme. Raggatt adds that, in these challenging economic times, the feed-in tariff is kick-starting the UK to moving toward a greener economy, which could spur economic and employment growth if exploited well enough.

To explore the in-depth analysis on the renewable energy market reaction and what is expected to happen in the next decade due to the feed-in tariff, read more about the report or purchase and download a copy at Greenbang FIT Report.

Click here to order the report.