Government takes the shine off solar
Date of Article
Jul 22 2015

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22 July 2015, A vast underestimate by the Department for Energy and Climate Change (DECC) of the take-up for solar PV projects of up to 5MW of installed capacity has led to proposals for an early cut to the Renewables Obligation (RO) support mechanism for new solar PV projects and extensions to existing accredited stations up to 5MW in Great Britain.

In a further blow to the sector, the deployment rate of solar PV schemes as compared to those anticipated by DECC is leading to the scrapping of the pre-accreditation system for all community schemes, regardless of technology deployed, up to 50kW of installed capacity.

These schemes will no longer enter the Feed in Tariff (FIT) regime at the date of planning approval and will instead become eligible only when they come on-stream, removing a period of up to two years that was previously available to finish installation. Equipment manufacturers are likely to come under increased pressure to supply projects as a result.

DECC had originally thought that capacity for solar PV projects of up to 5MW installed capacity would increase by 300MW to 500MW in both 2015/16 and 2016/17 but updated figures estimate a higher level of 800MW and possibly as much as 2GW being connected to the electricity grid during both periods, almost tripling the lower estimate and quadrupling the higher in each year. From today, DECC proposes to cut the Renewable Obligation early, with effect from 1 April, 2016, as well as removing grandfathering for solar PV projects of 5MW and below, that are not accredited under the RO as of today.

DECC is launching a consultation with the renewable energy industry on this major change to the RO. It closes on September 2 2015, and Andrew Watkin, head of the energy and marine team at national property consultancy Carter Jonas, is urging the renewable energy industry to proactively lobby against the proposals.

“There’s a danger that this period of six weeks, much of it at a time when many people will be on holiday, will see the issue pushed down the pile of priorities, but it’s vital that the process is not ignored and that the renewable energy sector make sure that DECC aren’t allowed to hide behind a poor response when cuts are implemented,” he warned.

“We’ve seen similar moves by DECC in the past with early cuts in the Feed-in Tariff for Solar PV. Also the Government were responsible for the delays to the commencement of the Renewable Heat Incentive in the UK, which caused businesses that had geared up to supply and install renewable heating technologies face bankruptcy!

“Solar PV development costs had been falling rapidly and the industry was forecasting for the sector to be subsidy free within 5 years. Today’s announcement will simply dampen investors’ confidence in an already unstable market and result in the Government having to fund more expensive energy generating technologies in order to meet the UK’s increasing power demands” added Mr Watkin.

Three strict criteria have been set by DECC for developers of new solar PV projects of 5MW and below to continue to be eligible to enter the RO after 31 March 2016 with full details available on the consultation website. Grace periods will be available for additional capacity added to an accredited solar PV station, up to 5MW total installed capacity, from 1 April 2016.

Before the 1 April 2016 closure date, new solar PV projects of 5MW and below can continue to be accredited under the RO if they have commissioned and submitted an accreditation application before 1 April 2016 and meet all the other usual RO eligibility requirements. This also applies to additional capacity added to existing accredited solar stations (i.e. stations accredited before the date this consultation begins) before 1 April 2016 up to 5MW total installed capacity.

The consultation document can be found by clicking here.

DECC says that since its launch in 2010, the FIT scheme has seen deployment and spend “significantly outstrip expectations”. An Impact Assessment in 2010 anticipated that, by 2020, the scheme would deliver approximately 750,000 renewable installations; as of May 2015, over 700,000 installations had deployed.

Preliminary accreditation (pre-accreditation) was introduced alongside degression to help with the uptake of the scheme among, and give certainty to, groups lacking experience of deploying low carbon technologies. DECC says that pre-accreditation has contributed towards those elevated deployment levels.

DECC is proposing to remove pre-accreditation and pre-registration (for community schemes <50kW) for all technologies from the FIT scheme, removing the link to the tariff guarantee for installations currently able to pre-accredit under the FIT. Such installations will only receive the tariff rate as at the date they apply for full accreditation. Developers will no longer be certain of the level of support they will receive under the scheme until the point at which their application for accreditation is received by Ofgem, the existing situation for most sub-50kW solar and wind projects as well as installations under the Renewables Obligation.

The change is likely to affect medium-scale commercial stakeholders and larger developers’ ability to secure funding, and to secure it under similar terms as are currently available in the market.

“Based on the vast degression rates we are seeing, removing pre-accreditation will significantly increase the financial risk for developers, and as a consequence we expect a vast reduction in the deployment of technology,” added Andrew Watkin.

The consultation on this FIT change closes on 19 August. Click here to download the consultation document for this FIT.