New Feed In Tariff Rates

Please find all the latest news about the UK Feed in Tariff. These articles make up part of our monthly Newsletter, which updates you about the Feed in Tariff; Renewable Heat Incentive and Green Deal. We also keep you abreast of the latest technologies and incentive schemes. If you would like to be kept up to date, then why not sign up for our monthly newsletter. We promise you will not get more than 1 email a month and there will be NO sales push – it is just the facts and opinions from Cernunnos. You can always un-subscribe at any time…

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5^th May 2012: FiT review to be announced imminently – will cuts take place in July?

The latest DECC review into the Feed in Tariff rates has now closed and the new tariffs are due to be announced, taking effect from 1^st July 2012.

As a reminder, the review focused on:

- Reducing the tariff rate to between 13.6p/kWh and 16.5p/kWh for 4kWp installations.

- Reducing the life of the scheme from 25 years to 20 years.

- Whether the annual payments are inflation linked or not.

- The Export Tariff Level.

- Whether the Generation tariff rate will be reduced by 10% every 6 months thereafter.

Now, whilst the industry has seen a collapse in the number of installations being registered, as seen in the following chart:

We believe that the Government will continue to cut the FiT ahead of the Green Deal. The Government will want the FiT tariff to be at a sustainable level for the introduction of the Green Deal, where other measures of energy saving are more financially viable than simply borrowing money to install PV (as the industry will undoubtedly sell it as).

We do not believe, and certainly hope they will not, take away the inflation linking, and whilst we agree the tariff could be cut again, we would like to see some sort of compensation through a higher Export Tariff.

17^th March 2012: New FiT review underway: 21p/kWh down to between 13.6 to 16.5p/kWh?

There is now another review being conducted by the UK Government on whether to reduce the FiT rate even further. This review was announced in the original changes implemented by the Government in 2011 and cannot be objected to in the Courts. The review closes on April 3^rd 2012 with the changes taking effect from 1^st July 2012. The Government is consulting on:

- Reducing the tariff rate to between 13.6p/kWh and 16.5p/kWh for 4kWp installations.

- Reducing the life of the scheme from 25 years to 20 years.

- Whether the annual payments are inflation linked or not.

- The Export Tariff Level.

- Whether the Generation tariff rate will be reduced by 10% every 6 months thereafter.

None of these changes will affect those with installations completed pre July 1^st 2012. The consultation document can be found here: http://www.decc.gov.uk/assets/decc/Consultations/fits-review/4309-feedin-tariffs-scheme-phase-2a-consultation-paper.pdf

1^st March 2012: New FiT Tariff Rates as of April 2012:

Just to reiterate as we have had several questions about this: As April comes and goes we have the annual inflation linking of Feed in Tariff rates, with the rates linked to the December RPI, which in 2011 was 4.8%. For all installations completed on or before March 3^rd 2012 will receive the following tariff rates:

In addition to this, the export Tariff has been increased to 3.2p/kWh from 3.1p/kWh.

For those that have installed their system post 3^rd March 2012, and for those looking to install a system in the near future, you will receive the following Generation tariff rates (along with the 3.2p/kWh Export rate):

1^st March 2012: The Economics of the new FiT rates:

The new Feed in Tariff rates have been announced and are as follows:

This article looks at the economic effects of this.

Let’s firstly take a comparison from where we are today. Currently a 4kW mid-range system costs £11,000. Let’s assume we have a South facing roof at an angle of 35 degrees and no shading. Given this, SAP (which is useless for most of us – but more on that later), will inform us that we will generate 3,314kWh of energy per annum (I would love to hear from those of you who have installations about what you think of this SAP estimate).

Given this Estimate Annual System Output, we can ascertain that at the old FiT rate we would have the following:

At the new rate of 21p this becomes:

Seems pretty scary! Hence you have all the comments of “this will kill the industry”; “everyone in solar will become unemployed” etc. However, we haven’t quite factored everything in.

For one, and the Government knows this, the 21p will be adjusted for inflation in April 2012. If the RPI remains at 5.6% then the 21.p will become 22.2p before it is even launched. Thus there never will be a 21p! At 22.2p the return characteristics become:

We are back to 10 years – not so scary!

Now, let’s look at the issue of Solar PV System prices. Firstly, and rightly, the Government said that Solar PV prices had come down by some 30% in the last 18 months. Secondly, with both Germany (one of the world’s largest PV markets) and the UK both cutting tariff rates in December it is fair to expect PV system prices to continue to fall. Below I have calculated the return characteristics for different PV prices of the system mentioned above:

Here, you can see that when the scheme started you received 43.3p for a system costing £16,000, and the ROI was 10.73% with a payback of 9.32 years. What about if system prices fall another 10%, and you get a mid-range 4kW system for £10,000 (which I feel will be possible in January 2012!): then you get an ROI of 10.18% and a payback period of 9.82years! We are back to square one!

Basically, the Government has reset the clocks! If system prices continue to fall then we can be back to where we are. Is that realistic? Who knows. However, what about advances in technology? We know that 300w panels will be coming out early next year, implying people with limiting space can fit more Watts per square meter. These more powerful panels will bring down the cost per Watt further. We also know that panel silicon efficiencies on a commercial scale are still running about 20%. That leaves 80% to be explored! By this time next year every manufacturer will have a Sanyo Hybrid version on the market – reducing the prices of that technology. This time next year every inverter manufacturer will have a Micro Inverter on the market – reducing the cost of that technology. We haven’t talked about further rises in electricity prices (did you know the UK pays one of the lowest rates for electricity in the EU?).

Those claiming gloom and doom and advising people to install now or forever regret the chance will be the same people back in the Spring next year highlighting how “affordable” Solar PV has become, or how “efficient” the technologies have become. Don’t panic. Those that have installed the early technology on their roofs have been rightly rewarded financially.

Finally, I go back to a blog written a long time ago (“Caveat Emptor: Calculating the Return on Investment of your renewable energy system” http://www.cernunnos-homes.co.uk/latest-news/caveat-emptor-calculating-your-roi/). The Government has announced that returns have been reduced to the 4.5% to 5% level in-line with their target. The Government use APR rather than Annual ROI. In APR terms:

13^th February 2012: Changes to the FiT from 1^st April 2012:

The tariff rates will continue to be the same as post-March 3^rd 2012, namely:

The major change will be the requirement to have a minimum EPC (Energy Performance Certificate) rating of “D” to be eligible to apply for the FiT scheme. It is still unclear whether this applies to ALL installations or not (i.e. whether or not Farm buildings etc are included or not).

Cernunnos Homes can now offer EPC rating services and will provide a preliminary survey on all Solar PV site survey’s (with an initial assessment of whether the property will meet the minimum requirement or not) and then a full EPC certificate for those that proceed to a sale.