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Feed In Tariff Remains Unchanged

Guest post by: Paul Sherrington

Article Overview: On coming to power, both the Liberal Democrats and the Conservatives claimed that they would be the Greenest Government ever. Now you might think that given the record of previous governments, this would be one of the easier targets any government had ever set itself.

Feed In Tariff Remains Unchanged

So it came as some surprise to the Renewable Energy industry when the Energy Minister, Charles Hendry, stated that the Feed in Tariff scheme, also known as the Clean Energy Cashback scheme was going to be reconsidered as part of the October Comprehensive Spending Review. Under the Clean Energy Cashback scheme, households, community groups, and businesses are paid generous Feed in Tariff rates to produce electricity by a Renewable Energy technology such as Solar PV panels.

The Renewable Heat Incentive (RHI), scheduled to come into force in April 2011, and supported by all political parties last year, proposed similarly generous tariffs for producing heat from technologies such as Solar Thermal, heat pumps, biomass boilers, etc. However, it appeared that the Government were also going cold on this scheme by making its future subject to the spending review.

The hesitation on the introduction of the Renewable Heat Incentive led the Solar Trade Association to announce that almost 50% of Solar Thermal installers were reporting a 75% or more reduction in business since May 6th. Many potential customers were delaying making a decision on their Solar Thermal installations until the RHI scheme was confirmed.

In response, manufacturers and installers of Solar PV panels orchestrated a media campaign, urging the Government not to tamper with the Feed in Tariff or Renewable Heat Incentives.

Citing the financial commitment made by hundreds of small electrical companies, and many big companies such as British Gas, Eaga, M&S and Tesco, the campaign warned the Government that millions of pounds had already been invested. Many of these companies had based their business models around the Feed in Tariff remaining un-changed until 2013.

For many larger companies, their business model involved installing Solar PV panels for free and using the Feed in Tariff to cover the cost. It was therefore critical that the Tariffs remained unchanged.

The industry held its breath and hoped that the Chancellor's Comprehensive Spending Review wouldn't be as bad as feared. And it wasn't. In fact, all in all, the news was rather positive:

• The Renewable Heat Incentive will go ahead in 2011 as planned, although the tariff levels and payment periods are still subject to the Government's response to the consultation which took place earlier this year.

• The Feed in Tariff will remain unchanged until a planned review in 2013. Anyone adopting Solar PV now will be paid the advertised rates for the next 25 years.

It is perhaps not surprising that the Government have chosen to leave well alone. Scrapping the Feed in Tariff, or reducing the tariff levels would have had undermined business confidence in future investments for Renewable Energy, and led to large job losses particularly amongst the small business that David Cameron has asked to lead the economic recovery.

The Feed in Tariff scheme also has many things going for it:

a) It is working - installations are in line with expectations, with over 5000 Solar PV installations since April 2010, and approximately 11MWp of installed capacity.

b) Funded directly by utility companies, it does not cost the Government anything - always a plus point!

c) It obviously and visually supports the Government's credentials.

It is expected that the scheme will go on to mirror the success of similar schemes in countries such as Germany where solar panels on domestic and commercial rooftops are a common sight.

If the Renewable Heat Incentive offers similar returns on investment that are currently being achieved through the Feed in Tariff scheme, we can expect the sight of solar panels for hot water becoming equally familiar.

So just for once, a UK Government has done the sensible thing by the Renewable Energy industry. It has left things well alone and allowed businesses to invest in training their workforce with the assurance that for the next 4 years, they will have a good idea of what the market conditions are going to be.

Now doesn't that make a change?

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Article Tags: conservatives, feed in tariffs, governments, targets, tariff



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