Changes to Renewable Energy Subsidies Announced
Date of Article
Dec 17 2015

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17 December 2015, The results of two controversial consultations have been announced today (17th December 2015) by the Department for Energy and Climate Change (DECC). These consultation results (available here) outline the changes to the Feed in Tariff (FiT) and Renewables Obligation (RO) which were proposed earlier this year.

The FiT is a major financial incentive for those who generate renewable electricity under 5MW in size, with a price paid for every unit of electricity generated. The consultation response announces and confirms reductions of up to 85% in the FiT, varying between technologies. As feared, solar has been particularly hard hit with average reductions of around 70%. Hydro projects have been less affected with reductions of 31-46%. The exception is large Hydro - projects over 2MW actually have an increased rate. These changes come into force on the 8th February, however all new applications will be put on hold from 15th January until 8th February, therefore in practice these reductions actually will be enforced from 15th January for all new accreditations. Some good news is that pre-accreditation will once again be allowed for renewable projects (wind/solar above 50kWp and all hydro, anaerobic digestion projects) after 8th February, providing some relief for projects that can take time to develop and implement. All new projects after 15th January will be subject to more stringent technology specific caps per quarter, limiting the projects that can qualify for the FiT - a queuing system will be in place for applicants who miss out with their applications for FiT accreditation frozen in a queue until the next cap opens but no guarantee of any support until they qualify under a cap.

These changes will make the business case for installing renewable energy projects more limited, particularly for solar. However, the right projects can still provide a good return on investment and we encourage anyone considering renewable energy to get in touch with Carter Jonas so that we can investigate the opportunity in more detail. Furthermore, there is some relief for larger projects with the re-introduction of pre-accreditation. Larger or more complex projects can now get some certainty over the finances for the scheme before making major investment, thereby giving investor security and reassurance.

The RO represents the obligation placed on electricity suppliers to generate renewable energy, with a market based financial mechanism for large renewable energy projects. As expected, the consultation response confirms that the RO will be closed to solar below 5MW from April 2016. The Government has decided to provide closure grace periods where preliminary accreditation or significant financial commitments have been made on or before 22 July 2015, and for projects affected by grid delay.