Further cuts to the FIT subsidy of 3.5% scheduled every three months under new cost control mechanism

Greg Barker

The feed-in-tariff for solar electricity will be cut by nearly 25% from August this year and will be subject to further cuts every three months, under a cost control mechanism announced by the government today.

Plus, the FIT payment period will be shortened to 20 years from its current 25 year length.

Under the proposals the FIT for domestic solar installations completed after 1 August will be 16p per kWh, down from 21p per kWh, a rate introduced in March this year after a lengthy legal battle.

Climate change minister Greg Barker said the changes would deliver “transparency, longevity and certainty” to the solar industry, which has stagnated since the tariffs were slashed and energy efficiency requirements were imposed on homes having the panels installed.

Under the new framework the tariff will be reduced by 3.5% every three months unless the deployment of solar panels is lower than the Department of Energy and Climate Change (DECC) expects, when the reduction will be postponed for up to two quarters.

However, the level of reductions will also increase if deployment exceeds thresholds set by DECC.

For domestic installations, which make up the vast majority of installations, deployment will have to be over 200MW of capacity each three months before the 3.5% reduction is applied.

But the size of the reduction will double for each additional 50MW over the threshold that is installed, up to a maximum 28% cut in any one quarter. The size of the cut each quarter will be announced two months in advance.

Alan Aldridge, chair of the Solar Trade Association, said: “Despite the currently slow market, the industry can have some confidence that the new tariffs are tight but workable.”