DECC Feed-in Tariff Review Response Released – ‘Less Bad’ News than Feared?
Well, now we know.
Ever since the publication of the FIT Review Consultation in August the future of the subsidy support available for renewable energy generation has been up in the air. The result has been a predictable rush to install technology before the end of the existing tariffs – particularly the case with domestic solar pv systems – and general uncertainty and fear about whether community renewable energy schemes will be able to go ahead.
Some four months on and today (17th December) the government has released its response to the Review consultation – available here.
Predictably, the spin is all about how government has listened to the renewables industry and has moderated the proposed cuts to the tariff. This is particularly the case with solar, which was facing the largest cut of all, down from 12.47p to 1.63p/kwh for a domestic system. Instead new installations coming on stream after the 15th January will qualify for a tariff of 4.39p/kwh. We will leave you to judge for yourself whether this is good news, or just ‘less bad’ news, and will simply comment that it is noticeable that the Fit Review Response document, unlike the original consultation, only compares the new 4.39p rate with the threatened 1.63p rate.
So, the question is, if you were considering putting solar pv on your property and haven’t managed to get round to doing so yet, will you still be interested now that the return on your investment has been capped at 4.8%? Here at Robert Owen, we believe that the savings that can be made, linked to an interest free loan package that can assist towards the upfront cost of installation, still makes solar pv an economically viable option, as well as a good environmental one, and we will continue to do all we can to ensure that our Zero Interest Loan Fund remains available to support the further installation of pvs in Powys, as well as seeking to spread the reach of this fund into other parts of Wales.
The theme of slightly less bad news continues when we look at community renewable schemes. But the picture here is not the same for all technologies. For groups seeking to develop a community wind turbine, the cut in the FIT is slightly less than expected, 5.46p/kwh instead of a threatened 4.52p, but this is coming down sharply from the existing tariff of 10.85p, basically a halving of the available income from the FIT. Such schemes are likely to still be viable at the mid-range 500kw turbine size, but as anyone who has been involved with a community wind scheme will tell you, such projects are not easy, are subject to the vagaries of the planning system and can end up taking many years to come to fruition.
And the clock is ticking, for built into the new FIT regime is both a cap on the amount of technology that can be installed in any one quarter, plus an automatic further degression in the FIT rate each quarter – with the threat of a further 10% ‘contingent’ degression if the cap is reached. Under these circumstances, a community project may easily find itself squeezed out of viability by more commercial developments, which have the advantage of experienced project management teams to push projects forward and a portfolio of potential sites under development.
The news for hydro–electric schemes isn’t even ‘less bad’ – it’s worse. Hydro is a fantastic renewable resource. One of the earliest forms of power generation, and indeed of electrical generation, it has less intermittency than solar or wind power and should be the proverbial, ‘no brainer’. But the regulatory framework around hydro is every bit as complicated and difficult as wind, with the added difficulty of potential multiple ownership rights and, consequently, additional costs. To be fair to DECC, the added difficulties facing hydro schemes has been recognised, and the return on investment used to calculate the FIT rate for hydro is the most generous, at around 9%. This is reflected in the fact that the subsidy for this technology is the highest available, at 8.54p/kwh for schemes up to 100kw capacity. But, and it’s a big but, that is less than the 10.66p originally suggested in the Fit Review document back in August, and down from the currently available price of 14.43p/kwh, which itself is down over 2p from the rate that was available back in September when the government withdrew the right of schemes to pre-accredit. It is difficult to see many schemes remaining viable in the face of such steep cuts in support.
The re-introduction of pre-accreditation is the only ‘real’ good news in the FIT Review response. This allows schemes to book their FIT tariff in advance once they have been developed to a certain point – generally receipt of planning permission, a secured connection to the grid, and in the case of hydro, having obtained water abstraction and impoundment licenses from NRW. Once a scheme is pre-accredited, it has a set period of time in which to install. This period of grace is different for each technology, 6mths for solar, a year for wind and two years for hydro. In the only discernible sop to community energy schemes in the document, an additional six months has been given in recognition of the longer time scales that such schemes face in comparison to private sector developments. Needless to say, ore-accreditation will not be available again to the new tariff regime comes into force.
Taken all in all, there is no good news in the FIT Review Response. There is nothing here that does any good for renewable energy, and what continuation of support there is, is meagre in comparison to the promised support for new nuclear developments, which seems to be the great white hope of the present government in the fight against climate change.
So, where does this leave us?
Robert Owen Community Banking has been supporting community groups to develop renewable energy projects for the last two years. We are proud to have played a role in supporting the development of schemes like Ynni Anafon Energy up in Abergwyngregyn, which started generating at the beginning of December. We believe in the value of community run renewable energy projects, and working with our partners in this sector, we will seek to enable as many schemes as possible to go forward.
We will do this by seeking to develop new means by which small investors can buy into community energy schemes, one that allows them to receive both a modest dividend and enjoy a reduction in the price they pay for electricity by linking their supply to the generation from the renewables projects that they have shares in. We believe that there are ways and means to make projects that have had the rug pulled out from under them viable again. The actions of government in cutting support to renewables just as their potential was starting to be realised, just make us more determined to help communities develop sustainable and profitable projects that deliver real community benefit – such as reduction in fuel poverty by targeting profits and reduced energy tariffs at fuel poor homes.
We hope that the Welsh Government, through its Green Growth Wales Investment Support Scheme (currently out for consultation), will do its bit to assist us in this endeavour by making new capital available for low cost loans in support of domestic and community renewables. If you are a community scheme, we would urge you to read and respond to this consultation.