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Cloudy Outlook with Sunny Spells?

Release Date: 21/12/2011

The Government has found itself in a deep midwinter of discontent over its handling of the Solar PV Feed In Tariff (FIT) – heavy weather of its own making, argues ELECSA.

But although the future is at best cloudy, there can be a better forecast for the industry if DECC goes back to the drawing board.  Two cross-party committees have criticised the government and the High Court has also delivered an embarrassing judgement that found Ministers acted unlawfully in cutting feed-in tariffs from the 12th December. The judgement concluded that the Government had not followed the correct legal process and were wrong to effectively reduce tariff rates without first laying regulations before Parliament.  Whether the government decides to appeal the judgement remains to be seen but they were warned that there was little chance of overturning the verdict.

“The effect of the judgement is that the "eligibility date" of 12th December is unlawful, and Government will have to rapidly table new proposals, a move ELECSA would support in order to clear the fog surrounding future installations for contractors.  A new eligibility date could be around the end of February which would give the 40 day period of required consultation that simply didn’t happen when the original proposals were first announced,” says Griff Thomas, ELECSA’s technical manager for renewables.

“However, the black cloud on the horizon is if the Government does appeal the finding - as it has said it will - and successfully overturn it, they will be able to re-impose the 12th December date.  This means that while there is a good chance of a later eligibility date, it will not be possible to guarantee the higher rates to customers until the legal process has finished.”

ELECSA believes that there is a long-term sustainable future in the renewables industry, but is concerned by the real growing frustration at the government attempts of getting its policy decisions right.  From the delays in the commercial RHI to the way the changes to the FIT scheme have been managed, the uncertainty caused has been damaging for contractors and their customers.

Thomas adds: “There will have to be changes to the FITs, but they must be measured and not rushed because as we have seen this goes against the Government’s own ambitious objectives – to reduce the UK’s dependence upon fossil fuel. The current handling has stalled growth of the solar PV industry and created confusion for householders and our installers who in recent weeks have experienced the outcome of Government mishandling - a dramatic gold rush and a potential boom and bust approach for this fledgling industry.”

There were a massive 71,000 installations notified in the final 10 days before the 12th December deadline. On the face of it, this could impact the future level of subsidy because of the diminishing amount still left in the government kitty as a result of the premature announcement. 

As soon as they confirm the new FIT rates, the better it will be for the industry. We still believe that the new rates will provide a backbone for a long and sustainable future for the industry rather than a short lived race to install green energy.

Brought in April 2009, the FITs were always only intended to kick-start the renewable technology industry, rather than provide an indefinite ‘financial crutch’. The strategy has been more than successful and since then, the UK has seen well over 165,000 installations and more than 250MW of capacity added to its renewable energy generation output.  A review was planned for April 2012 but the enthusiasm for the scheme has meant that action is needed to ensure the long term future of the technology in the UK” says Thomas.

“Many had already begun to question whether their continued use of high FITs could be viewed as fair and equitable.  Our view is that while the scheme continues to offer generous payments, the cost of equipment, especially modules has fallen dramatically, somewhere between 40-70%, and this provided the financial context for earlier than planned cuts in the tariff payments available.”
 
“At ELECSA, we believe that a cut in the Feed in Tariff can be afforded without damaging future prospects, but the rate at which they were introduced has had a big impact on the confidence in the sector. The up until now generous FIT payments have served their purpose in getting renewable technologies more widely understood and accepted and it has outperformed all expectations.”

So whilst FITs may be reduced in the future, the returns will still be there for customers looking to invest in solar PV and so, ELECSA argues, it will remain a growth market, along with other renewable technologies.
Renewable Heat Incentives.

On the other side of the coin, the government has performed better in relation to the Renewable Heat Incentive. The Government delay for the RHI only came to an end at the end of November and ELECSA’s certification director Chris Beedel argues that it has always been the case that it is better to be late than never.
The body provides both Part P certification for electrical installations and has hundreds of contractors registered to its MCS scheme for renewable energies since it was established in 2009.

Beedel says the five month delay was worthwhile if it irons out any wrinkles in the process.
“Whilst we were disappointed to hear that the commercial RHI was to be delayed, we appreciated that this ground-breaking incentive is a world first and therefore warranted the required consultations to ensure it can deliver to its full potential.”

“It was simply a case of better to get it right, than get it right now so we did not have to go back to the drawing board later on,” adds Beedel.

DECC has quietly announced the fact that it was open for RHI applications from Monday 28 November for non-domestic use.

The RHI for commercial installations was supposed to have come into force in July, but the Government backed scheme to provide financial support for installing low carbon heat technologies suffered a last minute setback after delays in securing state aid approval forced the Department of Energy and Climate Change (DECC) to postpone its launch.

The start of the scheme was delayed while DECC resolved its compatibility with state aid rules and consequently resubmitted the draft regulations to Parliament. The process now complete, organisations can now apply to OFGEM for support under the scheme from Monday 28 November and will receive payments on a quarterly basis for heat generated over 20 years.

“This has been a timely announcement in terms of the bigger renewable future in light of the recent concern over FITs. The statement underlines a longer term commitment strategy from DECC and will encourage installers to invest in microgeneration futures, beyond solar PV,” says Beedel.

The RHI, to be administered by Ofgem (Office of the Gas and Electricity Markets), aims to provide continuous financial support for over 20 years to renewable heat generators in England, Scotland and Wales and will work in a similar way to the current Feed-in Tariff scheme.

For certain types of small and medium-sized installations (up to and including 45kWth), both installers and equipment must be certified under the Microgeneration Certification Scheme (MCS).  These include:
• Biomass boilers (including CHP biomass boilers)
• Solar Thermal
• Ground Source Heat Pumps
• Water Source Pumps

There are additional technologies covered by the RHI but outside of the MCS standards such as:
• On site biogas combustion
• Deep Geothermal
• Energy from Municipal Solid Waste
• Injection of bio-methane into the grid

At present the RHI does not include Air Source Heat Pumps, however they may well be included at a later date once a suitable metering solution has been agreed.  A second phase of the RHI, starting in late 2012, aims to establish support for similar renewables in the domestic sector.  For more information on the RHI, visit DECC www.decc.gov.uk or Ofgem www.ofgem.gov.uk. The full list of RHI tariffs can also be downloaded by visiting either of these websites.