The tariff for a domestic solar PV installation will now fall to 16p/kWh, down from 21p, and will be set to steadily decrease on a three month basis by 3.5 percent thereafter. These digressions are expected to be delayed if the market slows down. Uptake will be seen in three different bands (domestic (size 0-10kW), small commercial (10-50kW) and large commercial (above 50kW and standalone installations). Quarterly reductions will be determined within those bands.
The new tariffs, which will now be paid over 20 years instead of 25 years, should give a return on investment (ROIs) of over 6 percent for most typical, well-sited PV installations, and up to 8 percent for the larger bands.
Investor income will also be boosted by the increase in the export tariff, which will increase to 4.5p from 3.1p. This will be particularly beneficial for larger scale solar investors, who will be able to add the export tariff to the feed-in tariff in order to generate a reasonable return on investment. All tariffs will continue to be index-linked in line with the Retail Price Index (RPI).
DECC also revealed that organizations with more than 25 solar PV installations will get 90% of the standard applicable tariff, increased from the 80 percent proposed in February. This increase reflects new evidence heard on costs involved for these projects.
Although reduced, the new rates are aimed at kick-starting the UK solar market, with an aim of installation at least 800MW in 2012/13. In fact, DECC expects that these rates to provide the resources for the UK to achieve 800MWp to 1,000MWp each year to 2015, with an extended ambition for 22GW for 2020. These figures account for solar capacity to be installed in each year than the original FiT budget offered over five years, reflecting the strong growth the industry achieved in 2011.
These figures do not include larger projects that are now able to use two ROCs; it is suggested there could be a further 300 - 600 MWp installed under this mechanism before April 2013.
“Today starts a new and exciting chapter for the solar industry. The sector has been through a difficult time, adjusting to the reality of sharply falling costs, but the reforms we are introducing today provide a strong, sustainable foundation for growth for the solar sector,” Barker commented.
“We can now look with confidence to a future for the solar industry, which will see it go from a small cottage industry, anticipated under the previous scheme, to playing a significant part in Britain's clean energy economy.
“I want to send a very clear message today. UK solar continues to be an attractive proposition for many consumers considering micro-generation technologies and that having placed the subsidy support for this technology on a long-term, sustainable footing, industry can plan for growth with confidence.”
Alan Aldridge, Chairman of the Solar Trade Association said: “We broadly welcome many of the Government’s decisions for how solar PV will be treated in the FITs scheme and wholeheartedly welcome the inclusion of Solar in DECC's updated Renewables Roadmap; this should reassure consumers and solar companies alike that the Government recognizes and stands behind a major role for the solar industry.
“Despite the currently slow market, the industry can have some confidence that the new Tariffs are tight but workable. Householders should be reassured the new Tariffs will provide more attractive returns than can be found elsewhere today. The STA is now keen to work with Government to get this positive message out."
The Minister also announced plans brought forward by Cornwall Council and the Building Research Establishment to set up a National Solar Centre in Cornwall.
Cllr Alec Robertson, Leader of Cornwall Council said: “The FiTs scheme allowed many people across Cornwall to learn about renewable energy, especially solar power, and Cornwall would welcome the establishment of a new National Solar Centre that will be at the heart of the bright future for PV in the UK. We’re pleased that DECC has announced changes that improve the predictability for the FiTs scheme”
Although many areas of todays news will inject an element of confidence into the UK solar market there are still some areas that are expected to cause concern. There is a fear that the August 1 cuts could continue to stall uptake, and that DECC has not accounted for this issue fully within the consultation.
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