FITs review

Update: 16 October 2012

FITs Licensee consultation: Government response

In the recent FITs Phase 2B Government response document, we indicated that a number of proposed changes required further consideration to ensure the final provisions are as effective as possible. On 11 September 2012, DECC released a consultation document (below) which considered each of these issues in detail and sets out our intentions.After careful consideration of the responses we received, we have decided to make a number of changes to the scheme. The response document explains these decisions.

As explained in the FITs Phase 2B response document, our intention is that the decisions made in light of this consultation will be implemented in the changes to the FiTS Order and the Electricity Licensees Standard Conditions documents, which will be laid before Parliament in late 2012. Subject to Parliamentary scrutiny, the decisions announced in the Phase 2b Government response will take effect from 1 December 2012.

Changes which impact on the levelisation process, will not take effect until the start of the 2013/14 FITs year (1 April 2013). This is to ensure a smooth transition for these changes within the annual FITs cycle.

Documents


Update: 20 July 2012

The Government’s response to Feed-in Tariffs Comprehensive Review Phase 2B: Tariffs for non-PV technologies and scheme administration issues has now been published.

These include the Government’s final decisions on tariffs for new anaerobic digestion, hydro, wind and micro-CHP installations, which will take effect from 1 December 2012, and on a range of other proposals included in phase 2B of the review.

Review phases

The comprehensive FITs review was separated into three phases, all of which are now complete.

Phase 1 considered small-scale solar PV (with a total installed capacity of 250 kilowatts or less), prioritising energy efficiency by linking PV tariffs to specified minimum energy efficiency requirements from 1 April 2012, and introducing new multi-installation tariff rates for aggregated solar PV schemes, applying to new installations with an eligibility date after 1 April 2012

Phase 2A of the review considered Solar PV tariffs and Cost Control mechanisms.

Phase 2B has considered all other technologies (Wind, Anaerobic Digestion and micro-CHP) and scheme administration issues.

Background

A principal objective of the review was to determine how the efficiency of FITs will be improved to deliver £40 million of savings, around 10%, in 2014/15, as committed to in the 2010 Spending Review. This commitment reflects the need for a responsible approach to public subsidies like FITs, to ensure value for money for consumers. HM Treasury published a control framework for DECC levy-funded spending that includes the FITs scheme.

A technical adjustment has been made to the FITs spending envelope to account for small-scale renewables that will come forward under FITs instead of the RO. The adjustment involves an upward adjustment to the FITs spending envelope, and a corresponding downward adjustment to the Renewables Obligation (RO) budget.

This is purely a technical adjustment and makes no difference to the actual amount of subsidy available for these levies.  It merely clarifies the amount that was always available for these schemes.

The review is considering all aspects of the scheme including:

  • tariff levels
  • degression rates and methods
  • eligible technologies
  • arrangements for exports
  • administrative and regulatory arrangements
  • interaction with other policies
  • accreditation and certification issues

Solar PV costs update

In advance of the publication of Phase 2 of the FITs comprehensive review, the following report was completed to update the information used as the basis of the FITs Phase I consultation document in October 2011.

This update report was completed by the same consultants as the original report – Parsons Brinckerhoff – and their company profile is also included below.

The original research carried out for DECC by Parsons Brinckerhoff / CEPA in summer 2011 and published alongside the consultation on 31 October 2011 suggested that PV installation costs had fallen by at least 30% since the launch of the scheme, and that current tariffs were leading to typical rates of return for investors well in excess of the 5% the tariffs were intended to deliver.

Evidence received by DECC during the consultation period, and this updated research by Parsons Brinckerhoff for DECC in January 2012 suggests that PV installation costs have in fact fallen by an even greater extent, with a typical domestic installation costing 45% less to install in 2011 compared with originally estimated in 2009.

Fast-track review

We have previously given fast-track consideration to the tariffs for large-scale (over 50 kilowatts) and stand-alone solar photovoltaic (PV) projects and farm-scale anaerobic digestion (AD) projects (up to and including 500 kilowatts). A consultation on the fast-track review was held from 18 March to 6 May 2011.

The outcome of this consultation was announced on 9 June 2011. This confirmed that, having carefully considered the responses received, the Coalition Government has decided to proceed with the proposed tariff reductions for large-scale solar PV (over 50 kilowatts), all stand-alone PV projects and increases for farm-scale AD projects (up to and including 500 kilowatts). The detail of this decision and the analysis underpinning it are set out in Feed-in Tariffs scheme: Summary of responses to the Fast Track Consultation and Government Response.

The new tariffs for large-scale (over 50 kilowatts) and stand-alone solar PV came into force on 1 August 2011. The new tariffs were introduced through Modifications to the Standard Conditions of Electricity Supply Licences. These modifications also include the new higher tariffs for farm-scale AD projects (up to and including 500 kilowatts). However, the implementation of the new AD tariffs was conditional on state aid approval.

The European Commission has now made its decision on the new AD tariffs. New tariffs for AD will apply to installations with an eligibility date from 30 September 2011, which is the date on which the Commission made the decision.

Extensions

Since announcing the outcome of the fast-track review, DECC became increasingly aware of evidence some large-scale solar PV developers were intending to use provisions in the FITs legislation on the accreditation of extensions to installations, to take advantage of the current tariffs beyond 1 August 2011. This was not the intended effect of the extension rules and was clearly inconsistent with the objective of the fast-track review.

Therefore, a consultation on the treatment of extensions was held from 27 July to 31 August 2011. The outcome of this consultation was announced on 27 September 2011 and confirmed the decision to amend the rules on extensions. These amendments have been made through the Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment No.3) Order 2011, which was laid in Parliament on 27 September 2011 and came into force on 18 October 2011. 

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