Solar Tariff cuts proposed for July and October

The solar industry might have been ‘wringing its hands’ over doom and gloom forecasts for the future of the solar feed-in tariffs ahead of last Thursdays (9th Feb) announcement by the Government on ‘improvements’ to the feed-in tariff scheme, to improve it’s long term viability, but it certainly hasn’t deterred households from enquiring via Solar Panel Quoter .co.uk about the costs of installing solar.

If anything, it’s been busier.

Once the initial announcement was made, the Solar industries mood lifted somewhat, although there were many equally worried about the industries future as the fine print was digested and we discovered that the proposals allow for a FiT rate cut in July and another one in October, based on the number of installations.

The FiT rate could be cut to as low as 13.6 per kWh in July (2012) and as low as 12.9 per kWh in october (2012).

The problems facing the longevity of the tariff scheme have come about due to massive over-subscription – far greater than anticipated, coupled with a faster than predicted fall in installation costs, meant that the ‘fund’ put aside to pay the tariff payments was under severe pressure. The Government tried to alleviate some of that pressure immediately by reducing the tariff paid for typical domestic installations from 43p per kWh to 21p on December 12th, however, that reduction has since been successfully challenged and the whole case is now expected to go to the Supreme Court, whilst households wait to see if they will have ‘struck it rich’ with their post Dec 12th installation.

Installation rates had fallen sharply by then as the solar industry moved to keep the industry going, so post Dec 12th installations, if the rate does get retrospectively applied, will see a much quicker return on their investment.

Here’s a quick breakdown of what the Government is proposing, subject to the 40 day legal process during which amendments can be made etc, so that the proposals become law from the 1st April.

Firstly, the proposals call for a domestic feed-in tariff rate of 21p per kWh, with a planned FiT rate reduction to between 16.5p and 13.6p kWh in July and a further reduction in October, when the FiT rate will be between 15.7p kWh and 12.9p kWh. The actual rate will depend on the number of installations that are carried out.

Eligibility factors for households will also be introduced. From 1st April (if the proposals go through), properties will have to have  a minimum energy efficiency rating (Energy Performance Certificate) of band D, which will have to be produced,  to qualify.

It’s always been the Governments argument that it makes little sense to pay households for producing green energy if its being wasted through poorly insulated or energy efficient homes. The Government reckons half the properties in the UK are already at band D levels.

Other tariff reductions will apply for larger installations.

A new multi installation tariff will come into force with rates at 80% of the domestic tariff rate. This will apply to individuals or organisations receiving FiT’s for other pv installations. The multi installation threshold is 25 + installations.

The Government said it recognised that this ‘cap’ might affect community housing projects and is looking at ways that will exempt such schemes from the multi-installation caps.

The Government has come under a lot of criticism from the solar industry for the way its handled the current tariff cuts amid fears it might have dented consumer confidence. The Government is proposing that in future, tariff rates will be directly linked to installation costs (which have already fallen by 45% since 2009) of the time and industry growth which we assume refers to the number of installations. Reviews will be carried out very 6 months.

It’s a similar model to the one operating in Germany, but hopefully without the need for “emergency reviews”.

Finally, the Government announced an extra £460 million to top up the existing feed-in tariff pot, to cover the the “high uptake” of solar installations this year. Are they assuming that they’ll loose a Supreme Court appeal and will have to pay post Dec 12th to 3rd Mar 2012 installations the full 43p rate? Even if they win that appeal, there’s no denying all the public furore has done is fuel interest in solar installations from households up and down the UK – a greater publicity campaign you could never envisage, has ended up opening many peoples eyes to the benefits of installing solar on their property.

If you’re worried that your home might not be band D rated and the costs involved in carrying out the necessary work to get it up to spec, then this Autumns Green Deal campaign might be the answer. Insulating and energy saving measures paid for by private enterprise, the installation costs being recouped through the difference in your energy bills.

This does mean a households energy bill won’t necessarily fall but their home will be much more comfortable to live in and ultimately, less energy will have been used to heat it, which will all count towards the Governments carbon emissions targets.

In conclusion, there will never be a better time to install solar panels on your property than now. Expect installers to get incredibly busy as the 3rd March deadline approaches. The larger proposals planned for April 1st (but still going through the legal process) might induce another mad ‘beat-the-deadline’ dash so expect installers to get booked up incredibly quickly.

This story first appeared in our weekly homeowner newsletter dated 13th Feb 2012 – click here to read it.

photo credit: price engines ltd

Leave a Reply

Your email address will not be published. Required fields are marked *