Changes to Feed in Tariffs

The Centre for Alternative Technology have just issued the following comments on the changes to the Feed in Tariffs.

‘Is it all over for solar photovoltaics and feed-in tariffs?
The feed-in tariff scheme was introduced around 18 months ago to support the development of small scale renewable electricity generation. It had a spectacularly successful first 18 months with thousands of people, including many CAT members, opting to invest in renewable energy – solar photovoltaics in particular. This gave a big boost to the renewable energy industry in the UK, with the cost of installing PV panels falling substantially and tens of thousands of jobs being created.

Many of you will know that the generation tariff – the rate that householders get paid for each unit of electricity they generate – will be roughly halved for anyone who installs after 12th December. For the small systems (less than 4kW) it goes from 43.3p/kWh to 21p/kWh.

On top of this, there will be a requirement from 1st April 2012 that the houses must achieve an energy efficiency rating of at least C in their Energy Performance Certificate (EPC) or have undertaken all the measures that are identified in the EPC as potentially eligible for green deal finance. While it is a good thing for the energy efficiency of homes to be improved, we would rather that people just installed solar panels than that they do nothing and we are concerned that some people will be put off by the extra complication and end up installing neither solar panels nor insulation. Linking FiTs to energy efficiency is a good idea but the government must also back that up by making energy efficiency measures financially viable for the majority of UK households. At the moment we are not very confident that the measures in the green deal will be sufficient to achieve this, and we’re also worried that the new tariff rate will not be high enough to persuade people to go through the hassle.

Finally, and perhaps of most concern, where councils (for example) decide to install PV arrays on lots of their housing stock, they will receive a lower rate than individuals installing just one array. The reason for this is that the economies of scale mean it is cheaper for councils to install lots at once. Nevertheless, we think these schemes should be encouraged, not penalised, because they allow people who could not otherwise afford to make the upfront investment to benefit from renewable energy.

Friends of the Earth and, separately, a group of PV installation companies are planning to challenge the proposals in court. There is also a public consultation on the changes; the chances of it making any difference seem slim given that the changes are due to come in before the end of the consultation period. However, making your views known certainly can’t do any harm.

It is also worth pointing out while the cuts to the feed-in tariff are substantial, they do not make it completely financially unattractive to install PV panels in good locations. For example, a 3.8kW system you might now expect to cost around £12,000. If this was installed in a very good location, such as a south-facing roof on the south coast, you might expect it to produce around 3,640kWh per year. So, assuming that you use half of the electricity yourself and sell about half of it to the electricity company, you still have savings on your electricity bill of £236, and you still get £55 from the export tariff. Under the new tariff rate of 21p/kWh you now would get around £764 from the generation tariff, which means overall your income and savings would be £1055 for the year, which means it would still take less than 12 years to pay back your initial investment.’

Although the government’s actions are really disappointing CAT’s final comment is certainly a very valid one.

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