DECC have today announced proposals to reduce the financial support available to larger scale solar-produced electricity. This will mean reduced tariffs for over-50kW solar effective from 1st August 2011. We had hoped that there would be a transitional phase, however, there is none proposed. This will be a huge blow for ground based and large scale solar projects as these changes will make such schemes non-viable.

DECC's stated reasons behind the proposals are as follows:

  • technology costs that are lower, or that are reducing significantly more quickly than modelled;
  • economies of scale for larger installations that are greater than modelled;
  • lower hurdle rates of return for large scale FITs development than modelled, e.g. driven by financing strategies; and/or
  • changes in economic circumstances that may favour the security of FITs investment over alternatives

DECC's concern is that such larger projects could potentially soak up the subsidy that would otherwise go to smaller renewable schemes or other technologies such as wind, hydro and anaerobic digestion. The Climate Change Minister, Greg Barker, has said that these proposals "aim to rebalance the scheme and put a stop to the threat of larger-scale solar soaking up the cash."

However, insight from our clients tells us that whilst it may be true that some costs are reducing, such as that of PV panels, there are other costs which are not reducing, such as the cost of labour, inverters and copper wires.

The new proposed rates are:

  • 19p/kWh for 50kW to 150kW
  • 15p/kWh for 150kW to 250kW
  • 8.5p/kWh for 250kW to 5MW and stand-alone installations

These compare with the tariffs that would otherwise apply from 1 April of:

  • 32.9p/kWh for 10kw to 100kw
  • 30.7/kWh for 100kw to 5MW and stand-alone installations

While DECC considers that there is a case for reducing the level of support for all new solar PV installations above 50kW, it does recognise that there is a distinction to be made between very large industrial scale solar developments and larger building-integrated systems that could for example be installed on schools and hospitals. Therefore, it proposes to introduce two new further tariff bands for PV installations between 50kW and 150kW; and 150kW and 250kW. The proposed tariffs for these bands are 19p/kWh and 15p/kWh respectively.

The consultation document also sets out the proposed new tariffs for farm-scale AD and these are as follows:

  • Less than 250kW TIC: 14.0P/kWh
  • 250 kW - 500kW TIC: 13.0p/kWh

Consultation closes on 6 May 2011. The Consultation Paper indicates that these changes will be made in July 2011 before the House rises for summer recess, and take effect from 1 August 2011. Practically, this means that solar projects over -50kW will not benefit from the current FITs unless they are commissioned prior to the summer recess. It should be noted that these proposals look only to change the tariffs and not other parts of the regulations. It is also important to note that the changes will not be retrospective.

The proposals will of course be subject to the outcome of the consultation and the process of Parliamentary scrutiny as required by the Energy Act 2008. However, those in the industry should be fully prepared for the changes to take effect on 1 August 2011 and to assess the likely impacts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.