Incentives for small scale solar dwindling

Incentives for small scale solar dwindling

Recent data from Ofgem has highlighted a drop in the scale of new solar installations supported by the Feed-in-Tariff (FiT). The solar industry is feeling the effects of the sharp reduction in subsidy tariffs that occurred at the start of 2016.

A review of the FiT scheme has been promised, but recent events may delay or even negate any such review.

The FiT scheme was first introduced in 2010 as a means to encourage development of small scale renewable technologies, with a capacity of less than 5MW. Developers were paid a FiT tariff rate for every kWh generated, while also being able to sell any surplus supply back to the grid. The popularity of the move resulted in a sharp uptake in small scale solar developments across the UK and the technology currently makes up over 80% of the capacity in the FiT scheme. The overall capacity of solar has risen from under 2GW at the start of 2013 to 4.3GW just two years later.

However, the pace of the increase led to a sharp rise in the subsidy costs which would have to be paid by consumers. This prompted the Government to overhaul the scheme in December 2015. As a result, one of the changes was a 65% drop in the support for domestic-scale solar tariffs from 12.47p to 4.39p/kWh.

small scale solar - FiT installation data

Unsurprisingly, new small scale solar installations have slowed sharply. While capacity already in place will continue to get support under the older and higher rates, any new developments will receive far lower revenues. As a result, solar deployment for the first quarter of 2017 was the slowest full quarter yet under the new regime. Just 50MW of new solar capacity was installed between January and March.

Reviews could be delayed by the snap General Election

The Department for Business, Energy and Industrial Strategy (BEIS) had promised a new review into small scale Feed-in-Tariffs by the end of 2017. It was hoped this could lead to a redistribution and possible increase in the support levels on offer. A review may have also addressed a possible extension of the scheme, which currently closes in 2019.

However, with this week’s announcement of a new snap General Election in June 2017, and the subsequent dissolution of the current Parliament in early May, it is possible these plans will be shelved, at least for the time being. Plans beyond June will be dependent on the makeup of the new Parliament and any energy manifesto pledges made by the ruling Government.

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Ross Moffat

Posted by on Friday, the 21. April at 13.51

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.