PROPOSED 50 PER CENT CUT BROUGHT FORWARD TO DECEMBER 2011 SIGNALS ANOTHER PREMATURE FEED-IN TARIFF (FIT) REVIEW
London, 1 November 2011, With the first comprehensive FiT review set for April 2012, the industry is now reeling from the announcement by the Department of Energy and Climate Change (DECC) concerning the proposed “early” solar PV tariff cuts which will be imposed from 12 December 2011 instead of April 2012.
The DECC had proposed that FiTs for solar schemes would be cut by more than half from 1 April 2012 but the coalition announced yesterday that any project registered after 12 December 2011 would be downgraded to the lower rate from April 1, after initially receiving the current higher tariff.
Whilst it is abundantly clear that there has been a significant uptake in solar PV deployment as compared to other technologies since the FiT was introduced in April 2010, cutting tariffs early when members of the public, companies, developers and investors have all committed to projects, yet again has a negative impact on confidence and heightens the feeling of mistrust of Government by those involved in the sector.
Andrew Watkin, head of the Carter Jonas Energy Team, commented, “We had hoped that the review date of 1 April 2012 would have been adhered to, but following our warning on 20 October after the consultation meeting at Westminster with the DECC, yet again they have moved the goal posts, now suggesting rates of return for projects will be approximately 50 per cent lower once the new tariff rates are in place. This is, to be frank, completely frustrating for all involved in the solar PV sector and will result in redundancies as well as businesses going into receivership.
The DECC are modelling on a return of 4.5 per cent. The issue for many will be that whilst the Bank of England base rates remain at 0.5 per cent, low interest rates are currently being paid on cash held on deposit, it really boils down to whether investors are prepared to gamble on future electricity price levels and build those prices into the financial model for each project.
Watkin continues, “We have also seen the introduction of the Renewable Heat Incentive (RHI) delayed this year. With the current economic turbulence in the Eurozone, investor confidence is unlikely to withstand another boom and bust business model in the renewable energy sector. The DECC should be intent on sticking to strategies to develop the sector with steady growth to ensure investor confidence is restored.
For press information please contact Gemma Haimes, head of PR, Carter Jonas, 020 7298 1822 email@example.com