Green Uncertainty: The Solar PV Debacle Feed In Tariffs

In GB, the Feed in Tariff (FiT) scheme operates as a green subsidy which was introduced under the Energy Act 2008 to encourage the installation of small scale 'green' generation units. Under the scheme, electricity suppliers are required to make payments to eligible generators at a specified tariff, which is set depending on the technology utilised and the tariff year in which the specific installation is accredited.

Solar photovoltaic (Solar PV) systems were considered as having high installation costs compared with other low carbon technologies and, as a result, greater financial incentives were designated to encourage the uptake of these systems under the FiT scheme. This provided installers with a guaranteed rate of return to offset the capital outlay required.

After the FiT scheme was introduced, the popularity of Solar PV systems exceeded expectations and the costs associated with the manufacture of the generation apparatus began to fall dramatically. These factors caused the Government to review the affordability of the FiT scheme with regard to Solar PV as the generous support payments coupled with the lower capital costs of installation made these systems even more attractive.

Round One – Support cuts for large scale Solar PV

In March 2011, the GB Department of Energy and Climate Change (DECC) published a consultation paper in which it was proposed that the assistance given to installations at the larger end of small scale generation would be cut dramatically (those with an output between 50kW and 5MW). The support rate was proposed to be cut back by up to 70% for the largest non-domestic installations.

Before a modification can be made, section 42 of the Energy Act 2008 requires the Secretary of State to consult the holder of any licence being modified, the Gas and Electricity Markets Authority and any other party whom it considers appropriate. This would include any amendments to the FiT tariffs for installations already accredited.

At the consultation stage, a commitment was made that any changes made would apply only to those who were new entrants and would not affect those installations already accredited. The consultation ran until 6 May 2011 and changes were to take effect from 1 August 2011. This allowed a short time frame for new installations to be accredited to take advantage of the higher support rate.

During the consultation process, it was stressed that the majority of new installations were small scale domestic based...