UK proposes lowering FIT rates

3 novembre 2011

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Announced the same day as the Ontario Power Authority’s review of the Ontario Feed-in Tariff program, the UK Department of Energy and Climate Change (DECC) announced the start of its review of its Feed-in Tariffs scheme (FITs) on October 31, 2011 by releasing a comprehensive review document and requesting responses in respect of its solar PV program.  The review is open for responses until December 23, 2011.

The review document proposes to reduce the prices offered to solar PV generating projects under 250kW commissioned after December 12, 2011 (projects between 250kW and 5MW will continue to be offered 8.5p/kWh, subject to adjustment per the Retail Price Index). Solar PV has led the FITs in terms of volume deployed and has had a substantial increase in the pipeline of potential FITs projects. That, coupled with the dropping cost of solar PV components and the rising cost of energy, has led to returns beyond the 5% originally envisaged which, in the DECC’s view, is not sustainable and thus requires a revised price.

While the Ontario Feed-in Tariff program is structured differently than the FITs, the OPA indicated a price reduction will be considered in its review when it announced its review process (see our previous blog posting ). The Ontario government’s long-term energy plan (available from the Ministry of Energy ) referenced previously reduced tariffs in Denmark, German and France and the effect advances in technology and economies of scale have on costs of production when discussing the upcoming Ontario review process. It is likely elements from the UK review will affect Ontario’s review.

Also interesting is that the DECC review proposes adding new tariff rates for solar PV “aggregators”. Under the proposal, where a single individual or organization owns several PV installations, all installations under 250kW owned by that individual or organization with an eligibility date after April 1, 2012 will be subject to a lower tariff rate. The eligibility date is defined in the FITs contracts but is likely to occur after installation of the project. An aggregator’s rate for a 100-150kW system, for example, is proposed at 10.3p/kWh as compared to 12.9p/kWh for a non-aggregator (which itself is a reduction from the 19p/kWh currently offered).

The FITs also seeks to link energy production with energy efficiency. If implemented, the proposal would see all solar PV installations connected to a building with an eligibility date after April 1, 2012 qualify for the full FITs price only if the building meets a certain energy efficiency rating. Failure to meet such rating would result in the PV installation qualifying for a reduced FITs rate. The proposal recognizes energy efficiency measures are more complex for non-domestic buildings but proposes the requirements apply to both domestic and non-domestic buildings.

The UK’s FITs began in April 2010. As at the 18 month mark of the program, September 2011, 255MW of solar PV had been registered for FITs according to the DECC’s report. That represents more than two and a half times the targeted 94MW anticipated by that time.

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