The UK government says it is giving the solar microgeneration industry ‘certainty’ by confirming further cuts to the feed-in tariff (FIT) for domestic solar installations from August.
After missing the deadline for introducing further cuts in July as planned, the Department of Energy and Climate Change (DECC) yesterday announced that as of August 1, the tariff for small domestic solar installations <4 kW will be cut from 21p/kWh to 16p/kWh.
After that, the tariff will be set to decrease 3.5% on a three-monthly basis unless the market slows down. In that case, the government will be able to freeze the tariff for up to two three-monthly cycles.
The tariff reduction will also be determined by the uptake in different bands - domestic (0-10 kW), small commercial (10-50 kW) and large commercial (above 50 kW and standalone) installations.
Tariffs will continue to be index linked in line with the Retail Price Index (RPI) and the export tariff will be increased from 3.2p to 4.5p. But the payment period has also been cut from 25 years to 20 years.
The government says that new tariff regime will provide ‘better value for money’ while still giving a return on investment of over 6% for most well-sited installations and up to 8% for larger projects.
The cut is in response to the falling cost of solar installations, says the government, while recognising the “increasingly significant place solar photovoltaic can now have in local renewable electricity generation”.
“[This] starts a new and exciting chapter for the solar industry,” said Energy Minister Greg Barker. “The reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector.”
He did admit that the sector had been through a “difficult time” but said it could now look forward “with confidence” to a future where solar power plays a “significant part in Britain’s clean energy economy”.
“I want to send a very clear message,” he added. “UK solar continues to be an attractive proposition for many consumers considering microgeneration technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.”
Despite the cut, the solar industry and environmental groups have largely welcomed the changes as spelling long-term certainty for the sector.
“After a year and a half of crippling uncertainty, the sun is starting to shine again on the solar industry,” says Friends of the Earth executive director Andy Atkins. “[The plans] will allow solar firms to get back on their feet, protect jobs and plan for the future.”
For further information:
UK government to delay further cut to solar feed-in tariff (22-May)
UK solar sales slump in wake of feed-in tariff cut (4-May)
UK government feed-in tariff reform puts microgeneration at risk (10-Feb)
UK government unveils new plans for feed-in tariffs (9-Feb)
25 May 2012