Government says new lower FIT rate will be pegged to the falling cost of solar PV

The government has set out plans for how it intends to reform the feed-in tariff scheme for solar electricity over the long term.

Under the proposals, announced by climate change minister Greg Barker today, the already announced reduced feed-in-tariff rate of 21p/kWh will take effect from 1 April this year for domestic-size solar panels with an eligibility date on or after 3 March 2012, with other tariff reductions applying for larger installations.

Over the long term this new rate will be pegged to the cost reductions for solar PV, in order to provide more certainty for future investments, helping the subsidy remain in step with the market, Barker said.

The government initially planned to slash the FIT rate from 43p/kWh to 21p/kWh for installations after 12 December, but this was then challenged by solar firms and campaign group Friends of the Earth, with the High Court ruling the government’s plans were illegal. The government now plans to appeal that ruling in the Supreme Court, arguing that the higher FIT rate was no longer affordable and could bankrupt the scheme.

As Building reported in January, the budget to pay for the solar feed-in tariff was already overspent by £31m.

But Barker said today the government would use “budget flexibility to cover the overspend resulting from high PV uptake this year”, while still allowing £460m for new installations over the spending review period.

Under the plans outlined today, properties installing solar panels on or after 1 April this year will be required to produce an Energy Performance Certificate rating of ‘D’ or above to qualify for a full FIT.

The previous proposals for either a ‘C’ rating or a commitment for all Green Deal measures to be installed was seen as “impractical”, the Department for Energy and Climate Change (DECC) said, adding that “about half of all properties” are already eligible for a ‘D’ rating.

Under the plans there will also be a new ‘multi-installation’ tariff rate set at 80% of the standard tariff to be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations, with the threshold is set at more than 25 installations.

DECC said individuals or organisations with 25 or fewer installations will still be eligible for the individual rate and it would consult on a proposal to enable social housing, community projects and distributed energy schemes to be exempt from these lower multi-installation tariff rates.

The proposals would also see the tariff for micro-CHP installations increased “to recognise the benefits this technology could bring and to encourage its development”.

Barker said the improved FIT scheme would “deliver for the many”.

“Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry. We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.

“I want to see a bright and vibrant future for small scale renewables in the UK and allow each of the technologies to reach their potential where they can get to a point where they can stand on their own two feet without the need for subsidy sooner rather than later.”