On 18 March I announced the start of a consultation on proposals to change Feed-in Tariffs (FITs) for solar photovoltaic (PV) installations larger than 50 kilowatts and farm scale anaerobic digestion (AD) of up to 500 kilowatts.
Having carefully considered the responses received, of which there were more than 500, I can now confirm the outcome of that consultation and the fast-track review of FITs.
It is clear from all the evidence received as part of the consultation that the demand for feed-in tariff subsidy has grown so substantially that it now significantly exceeds the amount of funding available during this spending review period. Without urgent intervention, the scheme would have been completely overwhelmed within a very short period of time. That is why it is so important for us to act now: it is vital that we protect the integrity of the scheme and can continue to support the ambitious roll-out of new, green, decentralised energy technologies in homes, communities and small business.
With that aim in mind, the coalition has decided to proceed with the proposed tariff reductions for solar photovoltaic (PV) installations larger than 50 kilowatts and all stand-alone installations, and increases for farm scale AD as set out in the consultation document. The detail of this decision and the analysis underpinning it are set out in “Feed-in Tariffs Scheme: Summary of Responses to the Fast Track Consultation and Government Response” which the Government is publishing today and will be available on the DECC website
I recognise that this decision will be unwelcome to some, including those involved in large solar PV projects who disagreed with the proposals relating to PV. I can assure the House that it is not a decision that has been taken lightly. All the concerns raised by respondents, together with alternative approaches suggested, have been carefully considered, analysed and taken into account.
However, these concerns have to be balanced against the need for a responsible approach to public subsidies like FITs, to ensure value for money for consumers and ensure scheme longevity. The fact remains that under the current tariffs, large scale solar PV projects are securing much higher returns on investment than the scheme intended. This is reflected in the unanticipated number of such projects now in the pipeline.
Put simply, the FITs scheme has a vital role in building a more decentralised energy economy, but if we don’t act now to keep short-term expenditure on solar PV more closely in line with the forecast that we inherited from the last government, the negative impacts on the scheme will be considerable and the amount of funding for other technologies and smaller, domestic scale solar PV will be severely constrained.
To give effect to these tariff changes, today a set of licence modifications to amend the Standard Licence Conditions of electricity supply licences has been laid in Parliament. Subject to any necessary state aid clearance and the parliamentary process required by the Energy Act 2008, the generation tariffs changes will apply from 1 August 2011.
The Government will not act retrospectively and these changes to generation tariffs will only affect new entrants into the FITs scheme from 1 August 2011. Installations which are already accredited for FITs at the time will not be affected.