The Government’s decision to axe the Feed-In Tariff (FiT) scheme will leave dozens of UK community groups “struggling to make the business case” for new small-scale solar projects, think tank Green Alliance has warned.
Launched in 2010, the FiT scheme provides payments to owners of small-scale renewable generators at a fixed rate per unit of electricity produced, enabling the cost of installation to be recouped. It has been one of the key factors contributing to the huge increase in solar photovoltaic deployment from 100MW in January 2010 to 12.7GW at the end of 2017, of which 4.8GW is supported by FITs.
According to Green Alliance, the closure of the programme on Sunday (31 March) will mean that 30 community projects totalling 4MW capacity will miss out on FiT contracts by the end of 2019. A further 77 private and public sector renewable schemes, totalling 32MW of solar and 21MW of wind, are also expected to not get FiT contracts.
This trend, Green Alliance claims, could leave many of the organisations behind these projects with “redundant business models”, forcing them to abandon construction. The think tank is particularly concerned that community groups will miss out not only on increasing the proportion of clean energy on the grid, but also the chance to create new jobs and skills while tackling fuel poverty.
“The Government has, unfortunately, in a short-sighted move, curtailed the FiT program without a substitute policy in its place,” Green Alliance’s senior policy advisor Chaitanya Kumar said. “It claims to be progressive on climate change and renewable energy, but is failing to support community groups and small-scale developers that are eager to contribute to the UK’s decarbonisation objective.”
The community energy manifesto
The warning from Green Alliance comes shortly after the group published its first community energy manifesto, which has received the support of around 20 community groups and investors to date.
The document urges Ministers to open up a “viable” FiT alternative for small-scale renewable generators, possibly through “subsidy-free” contracts for difference (CfD) auctions for onshore wind and solar.
Furthermore, the manifesto says community energy groups should be helped to participate in local innovation trials, for which most funding currently goes to industry incumbents. To overcome their “knowledge gaps” and “lack of access to professional expertise”, they should be supported by a “well-resourced” body such as the Community Energy Hub.
The Department for Business, Energy and Industrial Strategy (BEIS) has already pledged to examine changing the capacity market rules to allow the participation of low-carbon generation, which is currently excluded due to its access to other forms of subsidy.
However, BEIS has maintained its decision not to introduce a subsidy-based FiT alternative, arguing that it “does not align” with the Government’s vision for low-carbon energy. Specifically, the department has claimed that the FiT scheme is no longer compatible with its “desire to move towards fairer, cost-reflective pricing and the continued drive to minimise support costs on consumers.”
A look on the bright side
BEIS’s stance has attracted widespread criticism from industry experts and other policymakers, including the likes of RenewableUK, Scottish Renewables, the Solar Trade Association and London Mayor Sadiq Khan. Indeed, the Renewable Energy Association (REA) has argued that it could spur firms accounting for up to 40% of the UK’s solar installation industry to leave the national market.
Since these concerns were voiced, BEIS has pledged to rethink its decision to close the FiT’s export tariff component, which is not a subsidy in itself but enables small solar generators like households to sell unused renewable electricity back to the national grid.
Moreover, several other groups have begun to argue that the playing field has now been levelled for a new era of subsidy-free, industrial-scale solar in the UK. The nation ranked seventh in the latest bi-annual Renewable Energy Country Attractiveness Index (RECAI) from consultancy EY, for example, up from 10th in the last index. Experts believe this trend is likely to continue, with several forecasts indicating that Britain will install 18GW of new solar capacity by 2030 and attract £20bn of investment.
This potential has been partly attributed to the success of the country’s first subsidy-free solar farm; a 10MW facility which was opened last September in Bedfordshire. Other large-scale subsidy-free arrays in development include a 15MWp onsite project at the Westcott Venture Business Park in Aylesbury and Warrington Borough Council’s recently announced 62MW solar and 27MW battery storage project.
Similarly, solar installation firm Mypower has argued that subsidy-free, commercial-scale solar power is now capable of competing with non-renewable power in the UK’s open market, with the average seller experiencing returns on investment (ROI) of more than 14%. Specifically, the company claims that solar power generated via large rooftop arrays now costs around 4-6p per kWh, compared to 14p per kWh for energy from coal and gas, and that photovoltaic (PV) systems now cost 66% less than they did in 2009.