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Proposals to Cut Feed-in Tariff for Solar PV

The Government published its consultation on the review of the Feed-in Tariff (FiTs) on 31 October 2012. The consultation proposes reductions to the FiTs for small scale solar PV installations below 4kW from their current level of 43p/kWh down to 21p/kWh as well as additional cuts to larger solar PV installations between 4kW and 250kW.

If the proposals are to go ahead new generation tariffs will apply from 1 April 2012 to all new solar PV installations which become eligible for FiTs on or after an earlier 'reference date'. The consultation proposes a reference date of 12 December 2011 meaning all small scale solar PV installations with a FiTs reference date after 12 December 2011 would be affected by the proposed cuts.

The proposed cuts are likely to have a devasting impact on the "free energy" business model which has been utilised on many PV projects to date. Whereas previously, the developer has installed the panels, taken the FiT and allowed the property owner to take the electricity free of charge, going forward, developers will have to re-assess their project economics which is likely to require a contribution to the installation costs from the property owner and/or payment for the electricity.

The proposals are still undergoing consultation and have yet to be finalised, however the news provides a clearer indication as to how the Government is going to distribute the FiTs in future.

The consultation will close on 23 December 2011.

Feed-in Tariffs Uplift for Small-Scale Anaerobic Digestion

The Government has confirmed the expected uplift to the Feed-in Tariffs (FiTS) for small-scale anaerobic digestion ("AD").

The new tariffs are as follows:

• Anaerobic digestion plant up to 250 kilowatts - increase from 12.1p/kWh to 14p/kWh
• Anaerobic digestion plant 250-500 kilowatts - increase from 12.1p/kWh to 13p/kWh

The new FiTs rates for AD come into effect immediately and will apply to all AD installations with an eligibility date from 30 September 2011.

Renewables Obligation Certificates Rebanding

The previously delayed consultation on banding levels for Renewables Obligation Certificates ("ROCs") was announced by the UK Government on 20 October 2011.

The consultation proposes the following key changes to the ROCs banding applicable to England Wales:

• Increased support for marine and tidal energy projects
• Increased support for biomass co-firing (subject to a capped limit)
• Reduction in support for onshore wind generation by 10% from April 2013
• Reduction in support for offshore wind generation tapering down from a current level of 2 ROCs per megawatt hour (MWh) to 1.9 ROCs/MWh from April 2015/2016 with a further reduction to 1.8 ROCs/MWh from April 2017/2018

The consultation highlights the Government's commitment to boosting investment in the wave and tidal sector, with projects set to receive 5 ROCs/MWh under the new proposals (marine generation currently receives 2 ROCs/MWh). This increase brings tidal and wave energy ROC levels in England and Wales in line with those available to Scottish generators under the Scottish Renewables Obligation Certificates ("SROCs") scheme. The UK Government's proposals stop short of the SROCs however, capping the 5 ROCs/MWh receivable to marine projects producing 30MWh or less only.

The consultation on the ROCs rebanding in England and Wales closes for responses on 12 January 2012.

Scottish ROCs Banding Proposals

Scottish Ministers have proposed amendments to the Renewables Obligation (Scotland) Order to reflect the UK Government's moves to amend ROCs banding in England and Wales.

The main Scottish proposals are:

• Increased support for wave and tidal generation operational before April 2017
• Reduced support for onshore and offshore wind generation
• Reduced support for solar generation from 2015
• Reductions for hydro electric, pyrolisis and gasification and energy derived from waste and landfill gas

The main difference between the Scottish Government's proposals and the proposals in England and Wales is the treatment of both dedicated biomass and biomass with combined heat and power (CHP). The Scottish Government has elected not to incentivise large scale biomass, proposing a cap on the size of dedicated biomass plants receiving support. Smaller, more efficient facilities will be eligible for 1.5 ROC/MWh, with CHP stations getting 2 ROC/MWh until 2015 and then 1.9 ROC/MWh in 2015-16.

The consultation on the Scottish Government's proposals closes for written responses on 13 January 2012.

Contact Us

For further information on our renewables sector, click here or contact:

David Cruickshank
Head of Renewables
0131 228 7219
david.cruickshank@mms.co.uk

This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.