Response to DECC fast-track review
Transcript of Response to DECC fast-track review
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-renewables.co.uk
Summary
Feed-in tariffs (FITs) to support renewable energy installations in the UK were
introduced in April 2010 with broad support from all three parties. For projects
with up 5 megawatt (MW) capacity, equivalent to the supply of about 900
households, FITs guarantee a tariff per unit of electricity produced for 25 years.
On March 18, the government announced a proposal to cut tariffs on solar
installations by over 70%, making any installation over 50 kW economically
unviable.
The new tariff level is arbitrary and designed to discriminate against solar. It will
benefit the large power companies at the expense of rural communities and
renewables entrepreneurs. The proposal will inevitably result in pressure on local
authorities to grant permission to hugely unpopular wind turbines. It represents a
U-turn by the government that goes against the Coalition’s commitment to
budget efficiency, localism, the fight against Climate Change and support for
small business.
Why has this happened?
Many other countries use FITs to support green energy. In order to support
different technologies and different sizes of installations, tariff levels are calculated
such that installers can reap a return of 5-8 per cent in real terms (i.e., after
inflation).
As solar installations keep getting cheaper, the level of FITs has to be reduced
periodically to ensure that returns for installers stay in the range of 5-8 per cent.
This is quite common across Europe. Germany, for instance, has cut tariffs by 11%
last year and will cut them again by 15%
in July this year. This is generally a
positive development as it brings FIT
levels in line with actual costs of solar
installations and thus keeps the industry
sustainable.
Since FITs were introduced in the UK in
April 2010, the cost of solar installations
has fallen by 15% in Pound Sterling terms
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(see chart). Hence we supported the government’s decision to reduce solar FITs
and suggested, over a month ago, to Gregory Barker and Chris Huhne a
reduction by 15% for all solar installations.
Instead, the government’s proposal is to keep tariffs high for smaller installations
while cutting FITs by over 70% for larger installations. Instead of keeping the
whole industry sustainable, this is likely to create a boom and bust at the same
time. Small, expensive installations will get super-sized returns while (by the
government’s own admission) larger installations will become economically
unviable and no more installations will be made.
Regulatory capture
In order to understand this erratic proposal it is necessary to look at the intentions
of the large power companies influential with the Department of Energy and
Climate Change (DECC):
1. The large power companies are the largest promoters of wind farms.
Southern Scottish has 840 MW of onshore wind farms and wants to build
another 2,160 MW; Vattenfall has 130 MW, EON has 126 MW and wants
more; and EDF wants to build 1000 MW.
Any number for solar installations pales in comparison with these massive
figures for wind farms. The 27 MW of solar farms with planning consent
that have prompted the government’s 70% tariff cut are the same size as
one wind farm such as EDF’s Burnfoot Hill installation. 27 MW is also the
number of solar farms installed in Germany on average in one and a half
weeks.
Needless to say, onshore wind farms are generally very unpopular with the
public because, unlike solar farms, they are massive installations that are
visible for miles and change the character of a landscape. If solar farms are
banned, the case for wind becomes stronger. Take as an example
Swindon in Wiltshire. It is public policy here to generate 11-15% of energy
from renewable sources. To achieve this, the Borough Council wants to
attract 85 MW of renewable energy installations. Today it has virtually
none. A planning application for wind turbines was recently deferred
because of massive public opposition. Two nearby solar farms have the
support of the public and parish councils. But if the government proposal
gets implemented and no more solar farms can be built, the choice of local
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authorities will be either to force through wind turbines or to miss their
renewable energy targets.
2. Several large utility companies (e.g., British Gas, EON, Southern Electric)
offer schemes for thousands of domestic rooftops whereby they pay for
the installation of solar panels but also get the FIT tariff. As the tariff for
these roofs is much higher than for solar farms (41.3 vs. 29.3 p/kWh),
these schemes are massively profitable for the utility companies. One of
these schemes would result in a payment to the utility company promoting
it of over one billion pounds over the next 25 years, paid for by electricity
consumers. The government claims to support households installing their
own solar panels but in reality a significant share of the subsidy will go to
the utility companies (after all, not many people can affort the £ 10,000 to £
12,000 cost for a residential rooftop installation).
So what’s the truth in the government’s announcement that “the Coalition is
determined to drive a step change in ambition for the deployment of
decentralised renewables ”? The highly respected scientist and environmentalist
Jakob von Uexkull summarises it succinctly: “Despite all the green talk, the
government is again showing itself stuck in the pocket of the fossil-fuel lobby .”1
Why does it matter?
1. The government proposal represents a U-turn. Conservatives and Liberal
Democrats vowed before the election to increase the size of installations
eligible for FITs to 10 MW (now solar is effectively banned above 0.05 MW
or 50 kW). They wanted to increase FIT levels, now solar FITs are slashed
by 70%. They wanted to reward renewable energy entrepreneurs but now
drive them into insolvency (for a solar farm just the planning application fee
paid to the government is between £ 25,000 and £ 30,000, it is non-
refundable when those projects can no longer be built).
2. Less solar means more wind. The government proposal acknowledges
that it will lead to ten to twenty million tons of additional CO2 emissions by
2020 that could have been saved by solar installations. To compensate for
them requires forcing local communities to accept hundreds of additional
1“As the founder of an organisation that played a key role in persuading the UK to introduce feed-in tariffs, I am
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wind turbines.
3. It represents an irresponsible use of funds earmarked for FITs. Instead of
channelling these funds to rural communities where solar farms pay rent
and business rates and employ staff, the government wants to divert them
to large utility companies. Paying an unchanged tariff of 41.3 p/kWh to
them instead of paying, say, 24.9 p/kWh (the current tariff of 29.3 minus a
sensible 15% reduction) for more efficient installations means getting 40%
less new green electricity generation for the same price.
A cynical approach by the government
It is frustrating that the government has made up its mind before the consultation
has even begun and puts out a huge amount of misinformation to discredit solar
energy. To name but a few:
• „The new tariff rates we're putting forward today for consultation will
provide a level of support for all solar PV and ensure a sustained growth
path for industry “ (Gregory Barker, Secretary of State). This is a mis-
characterisation of a proposal that benefits the large power companies
while hurting farmers and small business. It is also misleading to describe
tariff levels that are 70% lower (the lowest in Europe in a country with
moderate sunshine) and that, according to the government’s own
forecasts will stop all solar farms, as the basis for sustained growth for all
solar PV.
• It is impossible to spot the „commitment to solar PV and to the widest
range of domestic and community-scale renewables “ in a proposal that
kills of all community-scale solar projects and makes solar the only
renewable technology for which the upper limit of projects will be 50 kW
while for wind, hydro, and anaerobic digestion the upper limit is 100 timeshigher. The Minister of State is applying double standards: a 1 MW solar
farm for him is an intimidatingly large scale project and a “solar farm threat”
(height: 2 meters) while as recently as February 2011 he has applauded 10
MW wind turbines (height: 99 meters) as “best practice”.
• “Large scale solar installations weren’t anticipated under the FITs scheme
we inherited and I’m concerned this could mean that money meant for
people who want to produce their own green electricity has the potential to
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be directed towards large scale commercial solar projects ” (Chris Huhne).
In fact, the FIT scheme explicitly set out rules for projects up to 5 MW,
which would generate about a thousand times more electricity than one
individual household consumes. Before the 2010 election, both
Conservatives and Liberal Democrats vowed to increase the FIT regime
both in terms of tariff levels (“We were pleased that our efforts in the last
parliament helped defeat the Labour government and get feed-in tariffs
into law […] the government watered down their proposals and produced a
scheme which by their own admission will produce less than 2% of our
energy. A better scheme would have produced up to 6%”, Simon Hughes,
then Shadow Secretary of State for Energy and Climate Change for the
Liberal Democrats) and maximum capacity (“we will raise the capacity limit
for projects qualifying for the existing FiT scheme from 5 megawatts to 10
megawatts ”, Conservatives Energy and Climate Spokesperson Greg
Clarke).2
2http://www.foe.co.uk/resource/briefings/decentrailed_energy_letter.pdf