Miguel Mendonça, Honary Research Fellow at Birkbeck College, has published his report on the first year of Feed-in Tariffs.
His findings, from a wide range of interviewees, was that stability was the one main attribute that was desired of the scheme.
This, of course, has been the main thing that has been missing – given the review of >50kW systems that DECC have announced and started consultation on.
In today’s Budget, and unreported so far I think, is the announcement (in a Budget supporting document):
3) The Government will cap the cost of policies funded through energy bills.
2.159 To ensure that costs to energy consumers of climate and energy policies continue to be controlled in the future, the Government is introducing a new framework to cap the impact of levy-funded support on energy bills. This will cover policies such as feed-in tariffs which the Office of National Statistics defines as tax and public spending.
From Plan for Growth
So it looks like we can look forward to a finite and specific limit to the number of systems that will be allowed to register for FiTs.
This FT article claims that DECC say the reduced rate will “save £30 million” over the next 4 years.
I can’t see how replacing solar-farms that would have been paid at a rate of 30.7p/kWh with domestic roof-mounted systems being paid 43.3p/kWh (which is exactly what DECC want to happen) will result in any savings other than by a reduction in the amount of renewable electricity being produced. If the same amount of electricity is produced then the costs would increase. So a saving can only be achieved if far fewer solar panels are installed. But how many? Let’s try to figure it out and I’m going to be using some ball-park figures to keep the math simple – so please don’t nit-pick the details.
The difference in the two rates is 12.6p so would need around 240,000 MWh less to be generated, over the next 4 years, to reduce the bill by £30 million.
240,000,000 x £0.126 = £30,240,000
Splitting that cumulatively in a straight line over 4 years gives a required reduction in generation of:
Year 1: 24,000MWh
Year 2: 48,000MWh
Year 3: 72,000MWh
Year 4: 96,000MWh
Total: 240,000MWh
The average size of a domestic pv installation is 2.5kWp (my analysis of published OFGEM FiTs data) and each one could generate approx 2.4MWh a year (just under 1,000kWh per kWp – based on SAP figures).
So to reduce domestic pv generation by 24,000MWh a year would therefore require 10,000 homes to not have systems installed in each of the next 4 years.
Just to be clear on what that really means – if all the solar panels that were going to be used on solar-farms were diverted to use on house roofs, assuming each panel is 250W, then 100,000 fewer of those panels are going to have to be installed for each of the next 4 years.
One 5MW solar-farm is about 20,000 panels – so 5 solar-farms worth of panels will have to be left unused for each of the next 4 years in order to achieve the saving.
Just how likely is this to happen?
It would appear that the “£30million saving”, that DECC expect to see from a switch from solar-farms to domestic pv, is just an illusion.
Northern Ireland will introduce permitted development legislation for some microgeneration systems from 6th April 2011 – finally bringing it in line with the rest of the UK.
A few details are different and are worth highlighting:
- planning permission will still be required for solar panels on roof slopes in conservation areas where they face roads
- conditions that require minimising effects on appearance or amenity have not been included
- Air Source Heat Pumps and wind turbines have not been included
DECC today announced the terms of the review of Feed in Tariffs for larger scale photovoltaic systems – those over 50kW.
They propose that the rates for pv are revised into the following new bands:
* >50kW – ≤150kW: 19p/kWh
* >150kW – ≤250kW: 15p/kWh
* >250kW – ≤5MW: 8.5p/kWh
All these sizes are currently covered by just 2 bands paid at 31.4p for 10kW to 100kW and 29.3p for 100kW up to the top limit of 5MW.
So for large solar farms (usually in the 1MW to 5MW size) this would represent a massive reduction in income and consequent extension to the payback time.
Under the current tariffs a 5MW solar farm could be generating approximately £1.5million a year in FiTs income and this would be reduced to £500k under the new tariff. A £15million 5MW solar-farm would take 30 years to break-even instead of 10 years. Based on this all investment in these will simply vanish.
DECC are running the consultation on tariffs until 6th May 2011 and the new tariffs are planned to be introduced from 1st August 2011. No adjustment will be made retrospectively to installations with existing FiTs contracts.
You can respond to the consultation here: DECC FiT tariff consultation
DECC announced the details of the Renewable Heat Incentive around 10:15 this morning. The main features are:
RHI will be introduced in two phases.
Phase 1.
RHI initially targeted at the non-domestic sector.
Non-domestic
Support for a range of technologies and fuel uses including:
– solid and gaseous biomass,
– solar thermal,
– ground and water source heat-pumps,
– on-site biogas,
– deep geothermal,
– energy from waste
– injection of biomethane into the grid;
Note – no ASHP initially – but this may be added from 2012
Only new equipment will be eligible, conversion of existing plant will not. Considered for the future.
• Support for all non-domestic sectors including:
industrial and the commercial sector;
the public sector;
not-for-profit organisations;
communities;
• RHI payments to be claimed by, and paid to, the owner of the heat installation or the producer of biomethane;
• Payments will be made quarterly over a 20 year period;
• For plants up to and including 45kWth both installers and equipment to be certified under MCS (or equivalent)
• Tariff levels have been calculated to bridge the financial gap between the cost of conventional and renewable heat systems, with additional compensation for certain technologies for an element of the non-financial cost;
• Heat output to be metered and the support calculated from the amount of eligible heat, multiplied by the tariff level;
• Biomass installations of 1 MWth capacity and above will be required to report quarterly on the sustainability of their biomass feedstock for combustion and where they are used to produce biogas;
• Eligible non-domestic installations completed on or after 15th July 2009, but before the start of the RHI, will be eligible for support as if they had been installed on the date of its introduction;
• The Gas and Electricity Market Authority (Ofgem) will administer the RHI including:
dealing with applications; accrediting installations; making incentive payments to recipients;
and monitoring compliance with the rules and conditions of the scheme;
• The RHI will be funded from general Government spending, not through the previously proposed RHI levy.
All systems up to 45kWth must be MCS to be eligible. All eligible systems installed since 15th July 2009 can claim RHI.
No allowance for grants and RHI payments. Anyone who has received a grant for systems since 15th July 2009 must repay it in order to qualify for RHI. Anyone who accepts a grant after the RHI regulations come into force will be excluded from RHI.
Domestic
Will also introduce Renewable Heat Premium Payments (RHPP) for the domestic sector supported by a ring-fenced £15 million fund (to be spread across 25,000 households = average £600 per household)
“These direct payments will subsidise the cost of installing qualifying renewable heating systems. In return for the payments, participants will be asked to provide some feedback on how the equipment works in practice and suppliers will be asked to provide a follow up service on any issues that are raised. This will boost confidence in the technology and the information we receive will help enable Government, manufacturers, installers and consumers to better understand how to maximise performance of the various technologies. The Renewable Heat Premium Payments will support a spread of technologies across all regions of Great Britain and will cover households using gas and other fossil fuels. We may consider focusing support for primary heating systems, such as heat pumps and biomass boilers, on households off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content. We aim to launch the Renewable Heat Premium Payments in July 2011 and will announce further details in May 2011.”
Phase 2.
Full support for the domestic sector – to be introduced in 2012 to link in with the launch of Green Deal.
Domestic users from Phase 1 (under the RHPP) will get access to the long term tariffs once these are launched.
“we will also consider introducing support for a number of other technologies and fuels which are not supported from the outset.”
The RHI will be open to new installs up to 2020. Scheduled review in 2014 and every 4 years.
No tariffs for domestic owners have been announced – these will be published later.
I noticed that OFGEM are currently recruiting for a range of senior jobs – all related to the RHI.
OFGEM have published the third Feed in Tariff newsletter – which has details of installations up to the end of December 2010.