Friday, 27 January 2012

Solar PV feed in tariffs – a new bonanza until 3 March?

The management of the feed in tariffs by the Department of Energy and Climate Change (DECC) has been shoddy. DECC have set aside a budget over four years that is now just a shade over £1 billion to fund the feed in tariff. That budget is now 75% committed after less than a year into the budget period. Faced with a budget crisis, DECC attempted to slam the doors shut on the now generous tariffs by announcing that installations installed after 12 December 2011 will be eligible for only 21 pence per kWh. The High Court ruled that this move (without consultation or Parliamentary approval) was illegal and that ruling was upheld on Wednesday by the Court of Appeal.
It was always anticipated that an increase in demand for Solar PV in the UK would lead to falling costs of installation. This has proved to be the case with the cost of systems falling by 30% since feed in tariff were introduced. The feed in tariff originally set at 43 pence per kWh now looks over generous. This is nice for those of us (such as myself) who are fortunate enough to be able to scrape together the capital cost of a small system. But it also means that companies offering so-called ‘rent a roof’ schemes can make a killing. (With a rent a roof scheme you get your system for free offering you some saving on your electricity bill but the installers capture the feed in tariff income).

Following this week’s ruling it seems likely (unless DECC are successful in their appeal to the Supreme Court) that if you get a solar power system installed on your roof before the 3 March 2012, you (or future occupiers of your property) will benefit from an income of 43 pence per kWh for the next 25 years. Any churches that had been considering putting panels on their clergy houses and have ready cash available have a fleeting second chance to invest at a particularly attractive rate, contributing to our care for creation and establishing a small income stream for mission.

So, given the current mess, what should DECC be doing with solar PV and feed in tariffs? Germany has implemented a similar scheme and expects to provide a whopping 10% of their energy needs from solar by 2020. Electricity is a high value form of energy and solar panels generate electricity during the peak hours of demand. With the right incentives even cash-strapped local councils will install PV solar on social housing enabling council house tennants to save on fuel bills.  With rising oil prices and cost of PV panels bound to fall further, solar makes sense.

What we clearly haven’t got right yet is the incentive pricing and the mechanisms for adjusting tariffs. So how about this as a way forward: -

1. In addition to a budget over the Comprehensive Spending Review period lets also work out indicative costings for feed in tariffs for solar and other renewables over 10 years

2. Agree in advance the cut off dates for future tariff adjustments so that church and other community solar PV schemes can plan accordingly

3. Publish the general criteria that the Secretary of State for Energy and Climate Change will use in determining the tariff for the next tariff period. This will provide those planning larger community schemes (for example on social housing) with some confidence in the government’s commitment to sustain tariff arrangements.

(See our joint churches response to the DECC consultation on feed in tariffs)