UK cuts solar tariffs by up to 72%

9 June 2011

The UK government has announced new feed-in tariffs (FITs) for large-scale solar arrays installed from 1 August, arguing that without reductions the scheme will be “overwhelmed”, while industry participants fear the changes will not be the last.

The revised rates – representing cuts of as much as 72% – will apply to new solar installations greater than 50kW and all stand-alone installations. Existing solar installations and those under 50kW will not be affected by the tariff revisions.

The changes follow a review into solar FITs which sought to address concerns that large-scale solar projects are crowding out funding for community groups and householders.

“Without action the scheme would be overwhelmed,” said Greg Barker, the UK Energy and Climate Change Minister, arguing that the revised tariffs will ensure “a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities”.

The review revealed a higher than expected number of planned large-scale solar photovoltaic projects, the government said, adding that each 5MW project would incur a cost of around £1.3 million ($2.1 million) per year, taking the lion’s share of the available incentive cash.

From August, new installations will receive 19p per kWh for installations of 50-150kW, 15p/kWh for those 150-250kW and 8.5p/kWh for 250kW-5MW and stand-alone installations.

Currently, the rates are 32.9p/kW per hour for installations 10kW-100kW and 30.7/kWh for 100kw-5MW and stand-alone installations.

The government has also revised its support for farm-scale anaerobic digestion.

Industry fears more to come

Reaction from industry was mixed, with many unconvinced that today’s announcement would be the final word on FITs.

Jeremy Leggett, founder of London-based solar developer Solar Century, said the rate announcement is “hugely disappointing” but unsurprising. He called for the government to engage with industry to avoid receiving “new nasty surprises in the coming months".

Daniel Guttman, renewables director at consultancy PwC in London, said the revised rates are in line with expectations, but warned against any further revisions “or destabilising comments” to give industry time to adjust to the new regime.

“This has been a knock to the system as it is, but if it happens again it could be terminal,” he warned. However, the effect of the FIT cuts will be low, he said, because the rooftop domestic market accounts for the bulk of installations.

Howard Johns, chairman of the Solar Trade Association in the UK, said the government has “got it seriously wrong” on solar.

“Crushing solar makes zero economic sense for UK plc because it will lose us major manufacturing opportunities, jobs and global competitiveness. It also risks locking us in to more expensive energy options in future,” he added.

The FIT changes remain subject to parliamentary approval and state aid clearance.

Charlotte Dudley