onsultation on the Feed In Tariffs Scheme€¦ · onsultation on the Feed-In Tariffs Scheme Response on behalf of the Solar Trade Association About us Since 1978, the Solar Trade

Solar Trade Association Greencoat House, Francis Street, London, SW1P 1DH t: +44(0)203 637 2945 e: [email protected] w: www.solar-trade.org.uk

@thesolartrade

1

Consultation on the Feed-In Tariffs Scheme

Response on behalf of the Solar Trade Association

About us

Since 1978, the Solar Trade Association (STA) has worked to promote the benefits of solar energy and to make its adoption easy and profitable for domestic and commercial users.

A not-for-profit association, we are funded entirely by our membership, which includes installers, manufacturers, distributors, large scale developers, investors and law firms.

Our mission is to empower the UK solar transformation. We are paving the way for solar to deliver the maximum possible share of UK energy by 2030 by enabling a bigger and better solar industry. We represent both solar heat and power, and have a proven track record of winning breakthroughs for solar PV and solar thermal.

Respondent details Respondent Name: Chris Hewett, Leonie Greene, Gemma Stanley

Email Address: [email protected]

Contact Address: Greencoat House, Francis Street, London, SW1P 1DH

Contact Telephone: 0203 637 2945

Organisation Name: Solar Trade Association

Would you like this response to remain confidential? No

Q1. Do you agree or disagree with the proposal to end the export tariff alongside the generation tariff, which would close the scheme in full to new applications after 31 March 2019? Please provide evidence to support your reasoning; for example, around the impact on jobs, deployment, consumer bills and the supply chain.

We strongly disagree and are concerned about the extent to which this proposal is already destabilising the rooftop solar industry. Together with 250 organisations, many representing diverse stakeholders and communities as well as innovative suppliers and leading battery storage companies, we have already urged the Energy and Climate Change Minister to confirm as soon as possible that the export tariff will continue next year. This certainty is essential to re-establish confidence in an already fragile and challenging market and to maintain momentum in the nascent ‘smart’ energy sector. BEIS has the evidence (though we repeat it below) that deployment in the solar industry is at an eight-year low. For the domestic sector, deployment has fallen to an average of just 4MW per

https://www.solar-trade.org.uk/wp-content/uploads/2018/08/Open-Letter-to-Claire-Perry-Export-Tariffs.pdf


@thesolartrade

2

month over the second quarter of this year (the most recent quarter for which there is data). For an industry that depends on high volumes to sustain low costs and high quality, such poor deployment is deeply concerning. Our ‘survey of surveys’ (see below) represents feedback from over 10% of MCS registered installers over the summer. There is common agreement between the surveys that the loss of the FIT alone will have a very severe impact on the industry. Half expect to lose ¾ of current staff, alongside a sales drop of 75%, and a third expect to close their business altogether according to HIES. The additional loss of the export tariff sees 80% expecting jobs losses with over 40% considering closure according to RECC, and 73% anticipating a negative impact with most firms expecting a collapse in the domestic market and/or the closure of their business according to Solar Power Portal. Industry is therefore already braced for a very challenging period with the loss of FITs, and it is deeply disappointing that BEIS would act to further damage its prospects by removing the export tariff. The number of solar installers in the UK has nearly halved since the 2016 changes to the FIT scheme. It is essential, if we are not to lose the larger portion of the remaining industry, that the fair export tariff be retained and that additional positive policies to boost domestic deployment are developed quickly. Major players are already struggling to maintain an installer network. The proposal to end the export tariff has particularly shocked the industry given it is not a subsidy and new EU legislation both recognises the value of this electricity and requires member states to ensure that ‘prosumers’ are fairly rewarded, at market rate, for the surplus clean electricity they contribute to the system1. Divergence from EU law damages the rights of prosumers in the UK. Divergence also puts us at a competitive disadvantage. The UK is currently in a fairly good position for the development of a ‘smart’ energy industry but removing the export tariff will put the development of the UK domestic ‘smart’ sector at a major disadvantage compared to European competitors, including battery storage and VtG. Furthermore, fostering a negative public perception of engagement with the grid, together with current barriers to cost-effective metered export, risk negative customer experiences and poor publicity for ‘smart power’. As per our previous consultation response, proposals for domestic investment must be assessed within the context of current major system change towards a smart, flexible energy system. This transformation in our energy sector is essential to mitigate potentially very high system costs as heat and transport electrify, as well as achieving our emission reduction targets. Recent analysis by Imperial College for OVO Energy shows that residential flexibility has a major role to play in both decarbonising energy and in delivering savings of up to £6.9billion per annum, equivalent to £256 per household. We are disappointed that the negligible costs in the Impact Assessment (which we dispute in any event) are not weighed or contextualised against the huge benefit for UK consumers of building smart infrastructure at the local level. The most recent Committee on Climate Change report to Parliament concludes that further policies will be needed in order to achieve our fourth and fifth carbon budgets. Decarbonisation also requires the active engagement of society. No other energy generation

1 Article 21 (d) of Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy from renewable sources (recast). “Receive a remuneration, including where applicable through support schemes, for the self-generated renewable electricity they feed into the grid which reflects the market value and may take into account the long-term value of the electricity fed in to the grid, the environment and society.”


@thesolartrade

3

technology empowers engagement right across society in the clean energy shift like solar PV. Government must surely recognise this and support, not undermine, widespread participation – particularly given the smart power agenda and the Industrial Strategy’s pledge to ‘develop smart systems for cheap and clean energy across power, heating and transport’ (p.45). In short, these proposals risk a negative triple-whammy to UK households; firstly decimating the solar industry wastes the considerable investment to date made by every household in a strategically important and popular sector; secondly, removing a fair export payment leaves solar homes in the absurd position of subsidising the multinational utilities sector for the foreseeable future; thirdly, failing to build local capacity in anticipation of heat and transport electrification will result in higher overall system costs. These proposals in no way appear to understand consumer value or strategic context, which is deeply worrying, and which undermines the Government’s stated commitment to build a smart energy system. The shock waves generated by these ill-considered proposals are resounding far beyond the solar industry and we urge BEIS to move swiftly to mitigate the damage. There is no point having a Smart Systems and Flexibility Plan if there is no industry to deliver it. Instead we urge the Government to urgently develop a positive set of policies that specifically target and incentivise ‘smart’ investment by domestic homes and SMEs, i.e. in solar, battery storage, smart metering and EV charging, in anticipation of local flexibility markets and with a view to reducing future system costs for consumers. More detail is provided below and in our call for evidence asks. With the export tariff providing a ‘floor’ around which innovation and market offers can blossom, an interim smart incentive will help homes to overcome the existing expensive regulatory spaghetti involved in bringing domestic electricity to market, such that they are ready to participate in local flexibility markets - when major regulatory reform has enabled their creation. In addition, further supporting policies will be needed urgently to sustain a meaningful domestic market and we set out a wide number of recommendations herein. We are concerned and surprised that the many barriers to metered export are not considered or consulted on in this consultation. We urge BEIS to review the detail herein on the many barriers to cost-effective metered export and to set out a clear roadmap for removing them. We are also alarmed by the lack of consideration this consultation and the government has shown for how to ensure standards in the industry are maintained. MCS has played an important role in ensuring high quality installations and this must be maintained. Our response also outlines the positive and creative policies BEIS could implement to support the growth of solar, which are needed urgently. We explain the difficulties that have predictably arisen from removing deeming for metered export without consultation. We agree with the need to levelise net metered export. Finally, the budget impact of replacement PV plant is miniscule and we expect these questions relate mostly to other technologies. Impact on the Industry We are at a loss as to how BEIS can describe removing the export tariff as ‘provid[ing] the certainty stakeholders have been calling for about its future’, whilst providing an “Impact Assessment” which makes no effort to assess the impact of retaining the export tariff. The EU has provided confidence and certainty for prosumers across Europe that the energy they contribute will be duly rewarded. The UK must do likewise and may well be required to under any Brexit deal.


@thesolartrade

4

The Impact Assessment (IA) underestimates the negative effect the removal of FITs and the export

tariff will have on solar deployment, thus the forecasts are unrealistic. The graph below sets out actual

deployment trends, which are starkly negative.

Extrapolating average monthly deployment to date in 2018, overall annual capacity for 2018 is likely to be 204MW. This represents a marked decline compared to 911MW last year, and compared to the all-time high of 4.2GW in 2015. In June of this year, only 11 MW of new capacity was added in all of the UK. We estimate that 11.9 MW of net new domestic rooftop PV capacity was added over the 2nd quarter, while 17.6MW of capacity was delivered in the commercial and industrial market. No utility-scale capacity has been installed anywhere in UK since an 8MW scheme was commissioned in March. The removal of the FiT will compound an already bleak picture for rooftop deployment.

Deployment: STA Estimates of Overall Rooftop Forecast Capacity

Our forecasted deployment differs from the IA. The additional annual capacity growth assumptions are lower because they reflect real world performance to date. Given the large decreases in deployment already observed since 2015, even with the FIT, the Government’s estimates are an obvious overestimate. BEIS considerably overestimated deployment under the revised 2016 FIT scheme and should not make this mistake again.

BEIS deployment figures also represent a very poor level of ambition, which is not consistent with carbon targets, meaningful public/community engagement in the clean energy transition, nor with the smart energy agenda. They send a very negative message to the industry and to civil society. BEIS’s figures also do not differentiate between domestic and C&I or community deployment which is regrettable given these are distinct markets with distinct stakeholders.

0

200

400

600

800

1000

1200

1400

1600

Pre 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018 (H1)

Inst

alle

d c

apac

ity

(MW

)

FIT-accredited capacity installed per annum

Domestic Commercial/Industrial Community


@thesolartrade

5

GOVERNMENT FUTURE DEPLOYMENT PROJECTIONS FOR SOLAR PV

Additional Capacity (MW) added per annum

Government Estimate 2018 2019 2020 2021 2022 2023 2024

Generation and Export 210 218 227 236 246 256

Nothing (high estimate) x 103 105 107 109 112 114

Nothing (low estimate) x 51 51 52 53 53 54

The table below is our best estimate, based on discussion with members, on how no FIT and no export will affect deployment levels. In the current FIT world, deployment is expected to hover around 200MW mark. In a world with no FIT and no export tariff, we anticipate deployment will be even lower than the pitiful projections above. The industry also faces further immanent threats, for example from the TCR with a risk of very significant charging increases to domestic homes with solar and battery storage, which will further harm the market. There is a real risk of collapse of the supply chain, given these numbers are insufficient to sustain a meaningful industry. Companies have to have sales teams, warehouses, memberships, a variety of online tools and websites. It will become too costly to maintain relative to income for too many.

STA FUTURE DEPLOYMENT PROJECTIONS FOR SOLAR PV BASED ON POLICY OPTIONS

STA Estimate (total) 2018 2019 2020 2021 2022 2023 2024

Generation and Export 204 195 200 205 215 222 227

Export Only (high estimate) x 97.5 100 102.5 107.5 111 113.5

Export Only (low estimate) x 65 66.7 68.3 71.7 74.0 75.7

Nothing (high estimate) x 48.75 50 51.25 53.75 55.5 56.75

Nothing (low estimate) x 39 40 41 43 44.4 45.4

Based on trends observed after previous FiT cuts, we estimate the commercial and domestic sectors to be split 75:25, representative of the fact that there are revenue streams and larger cost reductions available for commercial rooftop installations.

STA Commentary on Future Domestic Deployment

Domestic installation is dependent on a number of factors. Many of our members, particularly larger members, report customers moving towards a ‘package’ of smart technologies, with some reporting half of new customers are taking up battery storage alongside solar PV. However, costs are still integral to household decisions to buy. BEIS calculates, based on costs estimated in their 2015 FIT impact assessment, that the IRR will be 1% for a 3kW solar generator and only ~2.5% (with an assumed 10%


@thesolartrade

6

reduction in capex costs above the rates specific in the 2015 FIT impact assessment). The BEIS 2015 IA includes the following table:

Costs were identified in the IA as £6,210kW for a 3kw PV system2. Thus, for a 3kw standard system, costs (with BEIS 10% capex reductions) is assumed to be £5,715. This is a higher cost than STA members would currently sell for, with an average system of this size around £5,000. The hurdle rate (which BEIS highlighted in their 2015 paper as assumed to ‘remain constant over time’) of the 2015 IA averages 6.2% IRR for domestic solar PV3. 4% was later identified ‘as the target rate of return for solar PV’ (p.19)(an unrealistic hurdle rate in the real world in any event). Even using our own lower installation cost figures, returns are way off the target hurdle rate of 4%. However, with the export tariff maintained, the IRR is nearer 5% in the IA. Whilst this is a significantly lower rate of return than with the generation tariff, we can only hope it is sufficient to see some limited form of deployment. The removal of a fixed generation payment for a period of 20 years, as well as no remuneration for the commodity they export, will introduce greater financial risk and is likely to decrease immediate customer stability and increase industry instability. Therefore hurdle rates for investment under such a negative policy environment are likely to increase, compounding the very difficult market.

Feedback from smaller installers indicates maintaining the export tariff only will provide an expected payback period 19.13 years. No FiT or Export provides an expected payback period of 25 years. Many years of experience at the STA tells us members report that people are likely to invest when they see a payment in 10 years or less. ~30kW has been highlighted as the potential threshold beneath which installers are very concerned that the investment case for customers will not be sufficient to see deployment. Therefore we are moving into an extremely challenging market.

2 https://beisgovuk.citizenspace.com/clean-electricity/fit-review-

2015/supporting_documents/IA%20for%20FITs%20consultation%20August%202015%20%20FINAL%20docx%20esignature%20included%20corrected.pdf p.23 3 https://beisgovuk.citizenspace.com/clean-electricity/fit-review-

2015/supporting_documents/IA%20for%20FITs%20consultation%20August%202015%20%20FINAL%20docx%20esignature%20included%20corrected.pdf p.13

https://beisgovuk.citizenspace.com/clean-electricity/fit-review-2015/supporting_documents/IA%20for%20FITs%20consultation%20August%202015%20%20FINAL%20docx%20esignature%20included%20corrected.pdf







@thesolartrade

7

Members identified maintaining the export tariff as it is now as a red-line issue, without which crisis looms. Modelling done by a major installer member reported that removing the option for deemed export increased the payback period for solar from 13 years to 27 years (and for solar and battery to 29 years), leading them to conclude that there will be no deployment without an export tariff. Another major member asks “below a certain level of payback, why would any company continue to offer solar in

the UK?”.

BEIS must also not assume that installation costs will continue to fall or use this assumption to remove the export tariff. BEIS’s own monitoring of pricing shows prices can increase as market volumes fall. That is because installers can only afford to take a small margin from installations when they have a high volume of installations. This is no longer the case for too many installers. Furthermore, as the supply chain weakens and volumes are lost costs can go up. We have many times provided BEIS with evidence from numerous quality sources that module prices today form the minority of installed costs and that future cost reductions depend mostly on Balance of System Costs (BOS) in future [attached again]. In turn BOS costs depend on the national policy and regulatory framework. Under a collapsed market it cannot be assumed that costs will continue to fall. The argument that future cost reductions (as if by magic!) will counter the removal of the export tariff is therefore complacent and shows poor understanding of cost structures and how the industry delivers cost reductions. The policy proposals also give a sharp competitive edge to European companies who, anchored in strong domestic markets, will be in prime position to move into the UK market with more competitive offers in due course.

There are also serious implications for the nascent battery storage market. Storage is only suitable for a proportion of customers and with a totally untested value proposition. Making this happen will require investment from businesses who will make losses on the initial installations – and they may now challenge why they are making this investment.

STA Estimates of Commercial Rooftop Deployment

Commercial and industrial (C&I) deployment is affected by different factors to domestic; however feedback was unanimous amongst our members that the export tariff was imperative for this market. This market has been greatly impeded by the unexpected hike in business rates in 2017. Whilst C&I deployment is in a stronger position than the domestic sector, routes to market are still precarious and limited to ‘rent a roof’ schemes under a PPA. The industry, when selling projects, cannot yet rely on a PPA market.

The IRR has a high emphasis in the C&I market. This is evidenced by the damaging effect that the business rates hike has had on deployment. For example, the impacts of business rates for a 7MW extension on one major project by an STA member would result in an additional £52,707 cost per annum in business rates. Given that this would lengthen the payback to 20 years (without inflation) = the project was cancelled. The STA has provided numerous other examples of project cancellation due to the business rate treatment to BEIS officials.

C&I investors are in the frustrating position of being incentivised through business rates not to self-consume onsite. The changes proposed by BEIS in this consultation would then particularly hurt those seeking to export the majority of their electricity. We urge a basic level of policy join-up such that the most efficient use of solar; onsite consumption at the point of use, is systematically encouraged.


@thesolartrade

8

Costs were identified in the 2015 IA seen above as being £54,800 for a 10-50kW PV system4. Thus, for a 50kW standard system, costs with 10% capex reductions is assumed to be £49,810. This indicates a higher cost than STA commercial installers cite: estimates for 50kW installation ranging from ~£47,000 again sees the government estimates on the higher side.

BEIS’s Assumed Proportion of Total Capacity

The graph below highlights the relationship between system size and the economics of adoption for solar ownership. The removal of the export tariff means that economics of adoption drive excessive optimisation of self-consumption (currently, due to lack of another route to market to sell export electricity, discussed in full later), which creates a general trend towards smaller systems (based on BEIS FIT statistics). The deployment of smaller systems will have a negative effect on overall capacity installed. We strongly disagree with the statement in the consultation (point 1.7) that ‘the current export tariff can disincentivise behaviour viewed as desirable such as self-consumption or the installation of storage’. Households are already strongly incentivised to self-consume because displacing electricity imports at ~15p/kWh delivers far greater value than exporting to the grid. Secondly, the future of the energy system relies on proactive consumers interacting with the grid through DSR, aggregation and other flexibility services. Battery storage providers agree with us that fostering a positive grid relationship is vital if consumers are to realise the value of their investment in energy storage, hence major UK names in battery storage have signed on to our letter to the Minister calling for the retention of the export tariff. In addition, battery storage uptake is inhibited through significant barriers such as VAT and lack of markets for their services, which we have highlighted in our call for evidence response and urge government to address. Contrastingly, as mentioned previously, it is expected that the larger scale commercial market will see comparatively higher deployment than the domestic market due to the barriers to installations differing.

4 https://beisgovuk.citizenspace.com/clean-electricity/fit-review-

2015/supporting_documents/IA%20for%20FITs%20consultation%20August%202015%20%20FINAL%20docx%20esignature%20included%20corrected.pdf p.23(Costs for solar PV <10kw = 6,210 (4950 for capex, 1260 for opex). For less than <4kw capex and grid connection = March 2012 = 2683, 2015 = 1732)





@thesolartrade

9

Jobs

The continuation of deployment of solar in the UK is beneficial for quality jobs and employment in constituencies across the UK. Surveys indicate that the complete removal of FiT will have a very negative impact on jobs and businesses from across the industry with the major actors in this space telling us they are already struggling to maintain an installer network. There is a real fear the skills and supply chain could collapse with some major actors in solar already wondering if they have a business case to operate in the UK next year:

Job losses to date

The STA has not undertaken a jobs survey across the industry since our major survey of over 200 companies with PwC in 2016. Since then the rate of new deployment (average net new capacity per month) has fallen by 90% (95% compared to 2015), so we would expect considerable further reduction in sector employment to have occurred since.


@thesolartrade

10

0

1000

2000

3000

4000

5000

6000

Pre 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018(H1)

Inst

alle

d c

apac

ity

(MW

)

Cumulative FIT-accredited capacity installed

Domestic Commercial/Industrial Community

This sharp downward trend is echoed in registrations with both RECC and MCS, which cover the domestic sector. Installer numbers registered with MCS have fallen considerably from 4,400 at the domestic industry’s peak in 2012. When the revised 2016 FIT regime was introduced 2,525 installers were registered with MCS. This has almost halved to 1,316 today.

Similarly, RECC registrations fell from a peak of 5,500 in 2012 to 2,800 in 2016 to 1,700 today. Industry rules require installers to join RECC before joining the MCS, so this accounts for the difference in numbers as registered companies did not go on to register for MCS, most likely as a result of negative policy changes.

Future job losses as a result of FIT closure and loss of export tariff

Member feedback to the STA, supported by additional sector input, suggests for some the anticipated halving of deployment with the end of FITs will result in a halving of employment. Medium to larger installers are already limiting growth and not replacing staff, and they highlight the loss of income and employment in rural areas they are based in representing a massive loss locally. Those moving into other lines of business would have to let go higher skilled, solar-specific personnel (for example, those able to survey and design installations). Those that can are moving to markets abroad, given the UK is classed as bottom of 20 global solar markets for future growth by Solar Power Europe. In addition to lower deployment forecasts impacting the viability of installer businesses, also highlighted as damaging is the abrupt cut-off date to the FIT. Because BEIS overestimated take-up under the 2016


@thesolartrade

11

scheme we are now facing a cliff edge to support, rather than a gradual tapering off. Many installers expect to see a rush to sign up to the FIT before it is ended, followed by a vacuum whereby marketing, customer-targeting and business strategies will have to fundamentally change to attract new investment. Many installers are concerned that even with these changes made; an insufficient volume of customers will be attracted to investing in solar post-FiT.

The largest players in the market tell us they are already having difficulties maintaining an installer network today and are deeply concerned about the future viability of the UK market. “I think the market

will be so starved that even if electricity prices rocket, there just might not be anyone to install.”

Low deployment projections impacting the viability of installers businesses

Below we pool the outcome of three very recent solar industry surveys under taken by both Chartered Trading Standards Approved Consumer Codes RECC and HIES, as well as a broader Solar Power Portal survey, which all show considerable consistency in their findings about the anticipated impacts as a result of current BEIS proposals on the domestic solar installer sector. While there may be some cross-over in responses (members of STA are likely to be members of RECC, and may also be readers of Solar Power Portal), collectively there are very likely to be over 200 discreet responses, given installers are usually a member of either HIES or RECC (both certifiers of consumer code standards), meaning that these replies cover over 10% of the UK installer industry. The Solar Power Portal survey covers all types of installer. The impact is much more likely to be felt on the domestic solar industry so more weight needs to be given to domestic-installer specific surveys. Likely impact of loss of Feed-In Tariff only The RECC survey does not cover the impact of the loss of the Feed-In Tariff alone. The HIES survey shows over half of respondents expect over 75% of jobs in their company to go, consistent with half of respondents anticipating sales falling over 75%. Over a third of respondents expect to close their business when the FIT ends. SPP survey shows 57% anticipate a negative impact on staff numbers. Likely impact of loss of both Feed-In Tariff and Export Tariff In the RECC survey 85% anticipate a ‘very negative’ or ‘negative’ impact with only 21% expecting no change to people employed. 41% will reconsider continuing to operate. The HIES survey does not look at the combined impact. SPP survey shows 73% anticipate the additional closure of the export tariff will have a negative impact on their business with most of these expecting a collapse in the domestic market and/or the closure of their business. Consistent with our membership, all surveys show strong support for the export tariff and for additional policies to help sustain a meaningful domestic market. As well as the loss of FITs, this is also due to major regulatory and market reforms being undertaken that are creating further uncertainty in revenue streams. These include, but are not limited to, the Targeted Charging Review and Access and Forward Looking Charging which have the potential to affect revenue streams potentially even retrospectively. If this happens it is likely to further damage consumer confidence. Contributing to this low consumer confidence, the Green Finance Task Force highlights in their ‘Challenges to overcome’ the ‘fears of policy uncertainty affecting returns due to the chilling effect of 2015 solar feed-in tariff adjustments’ and it is noted the consultation has not considered the economic impact of Brexit. Given


@thesolartrade

12

such great uncertainty affecting consumer confidence the following policies are seen as particularly important to the industry:

Financial Incentives

There are numerous policies that could be amended or implemented to provide financial incentives for investment that don’t amount to a subsidy. These low hanging fruits can be implemented easily and quickly.

Firstly, Salix Finance for public sector solar and storage projects should be available for those with up to a ten year payback. Our modelling on schools indicates that the current 8 year period is not sufficient even for schemes optimised or self-consumption.

Low income consumers, social housing tenants and community groups can and should continue to be able to benefit from solar – government support through subsidy, grants or other means is still required for these groups. The FiT budget underspend should be recycled to aid support of these groups and not transferred back to Treasury. Zero interest loans for solar and storage should be available as well, as is the case in Scotland through their Home Energy Scotland Renewables Scheme.

Green Mortgages (such as Help to Buy – Wales scheme) offerings should also be expedited by the government.

Building regulations are of paramount importance - a revision of national standards on energy should be done to ensure the vast majority of new buildings will integrate onsite solar alongside; this would make full use of cost reductions available to new build solar PV through the access to scaffolding and roofs already in place unlike with retrofitting systems. Linked to this, differential stamp duties for EPC ratings should also be implemented.

Prior to the FiT, Solar PV was eligible for EIS and ECA support – to avoid double subsidies being claimed this was removed when FiTs was introduced. With the closure of the generation tariff after March 2019 this eligibility should be re-established. Business rates hike has been discussed in full with BEIS and we continue to lobby for solar PV and storage to be excepted as onsite CHP already is. The continuation of this discrimination against particular technologies must end.

Other

Solar PV currently faces barriers through grid constraints and DNO practices. It is imperative to ensure there is no dispatch limit for rooftop installations. DNO’s should not be able to exert control over the size of projects fitted with an export limiter (as happens on a routine basis), best practice guidance agreed upon by DNO’s is required here if not its inclusion within regulations.

Solar PV and onsite generation should be fully incorporated into ECO3. There is scope for solar PV to be funded under this scheme to improve consumer energy independence from supplier price increases as well as reductions to their energy bills. Given the anticipated severe impact on the solar market from the removal of FIT and export tariff we urge government to come forward with these positive additional policies to boost the market and to ensure quality standards are maintained.

Anticipated Impact on Consumer Bills


@thesolartrade

13

We disagree with your cost estimates and your presentation of the export tariff as a public subsidy and therefore a ‘cost’.

BEIS needs to stop punishing the industry for DECC’s failure to adjust the FIT quickly enough in 2011/12, which accounts for the majority of committed expenditure cited in the consultation. It is more than time to move on and to deal with the reality about the very low levels of support now provided for solar, which are dwarfed by current subsidies to other technologies, including fossil fuels. Under the 2016 FIT IA, only £40million was allocated for expenditure on solar until 2018/19. In fact, deployment has been around half of anticipated levels, with the budget similarly under-deployed. We therefore cannot see how you arrive at a ‘cost saving’ of £1 for closing the scheme. Our own analysis (which has been very accurate to date) has the figure around 25p. Please explain your workings.

We do not accept the export tariff is a ‘cost’ or a ‘subsidy’. Neither does the European Union which has recognised the value of this electricity to the system to the extent, not only that prosumers must be paid a fair price, but that the export payment can “take into account the long-term value of the electricity fed in to the grid, the environment and society”.

The simple reality is that we have inherited a highly centralised system and market which is not set up to engage small-scale domestic actors. Therefore mechanisms must be developed, as they have been, to overcome this which will inevitably be imperfect. It does not mean households should continue to be excluded or that the power they produce has any less inherent value. Quite the opposite, generating energy locally has increasing value given inevitable trends in local electricity demand rising. The simple laws of physics dictate that surplus power will spill to the nearest user who will be paying their supplier ~15p/kW for this power.

Furthermore, the solar energy that is produced by customers is currently not accounted for within the market, it is spilling unmetered onto the grid. The GSP group correction then relates to this volume of spill within a distribution area that is not accounted for after all the other energy has been accounted for in cash-out. This is then shared out amongst suppliers as a saving to their market share, reducing supplier costs and a saving which is passed on through consumer bills (confirmed by suppliers). Estimates of this spill saving that solar produces to consumer bills varies depending on how much penetration solar has regionally but is estimated to be as much as £5 per year in the most concentrated areas. So the value of the energy generated is reflected back to all consumers within a given geographic area.

No other form of generation is expected to supply electricity to the grid for free and the System Spill Price other unaccounted for generation receives would never be described as a subsidy. In 2018 the average System Spill Price paid to generators (£54.98/MWh) has been slightly higher than the export tariff paid to households (£52.40/MWh) which shows households are being paid a very fair price. The lack of systemic or commercial routes to market means without the nationally administered export, consumers stand to subsidise the commercial industry, and that they are vulnerable to exploitation. This should never be considered acceptable.

What BEIS needs to focus on, together with industry, is what constitutes a ‘fair price’. We do not wish to see the price set above a sensible level as this will inhibit FIT-licensees and the development of commercial offers for smart services. But we do not believe the price should be below the System Spill


@thesolartrade

14

Price (previously identified by DECC as the right measure) and it is vital that BEIS establish some level of continuity and stability in the industry as soon as possible.

We would also like to see a temporary incentive to overcome the current costs and administrative complexity of enabling homes to deliver metered export and smart functionality. It is deeply disappointing to our battery storage members (and also VtG providers) that as domestic providers of services they are not able to access the network charging signals on GDUoS that are available to non-domestic users. This is an example where, simply by virtue of being ‘domestic’, smart technologies are unable to access revenue streams available to other generators.

Carbon Budgets & Public Engagement

The most recent Committee on Climate Change’s submission to Parliament concludes that further policies will be needed in order to achieve our fourth and fifth carbon budgets, even if all current and announced emission reduction policies deliver wholly. Continued low deployment in this sector will have a further knock on impact on our progress towards achieving our Carbon Budgets targets – a significant worry considering the UK is currently not on track to meet carbon reduction targets of 15% by 2020.

Solar is the most popular energy generation technology by some way in the UK. And for good reason. No other technology democratises energy ownership so strongly and enables widespread public engagement in the shift to a clean energy system. This is not only households, but communities, public buildings such as schools and churches, farmers, social housing providers and local government. Disempowering & alienating diverse actors from engagement at this point in time seems extraordinary. Not only from a basic public engagement perspective, but it is particularly ill-considered given the urgent need to shift to a smart, flexible energy system, which the Government has said it supports.

Building a Smart, Flexible System

Decreasing deployment in solar PV through the removal of the export tariff will slow development of local smart infrastructure, losing the cost saving benefits to consumers that smart, flexible energy systems facilitate. This infrastructure relies on a trinity of installations: smart meters, solar PV and storage. From this combination the full maximisation of potential of all other smart, flexible applications can materialise (e.g. EV’s and V2G). Analysis of storage installation trends indicates that without new solar deployment it is likely storage investment could also decrease in the residential sector. This comes from estimations from installers that indicate 60-70% of all new residential ES systems are installed alongside new solar, with the rest being retrofitted to older PV installations – for instance through the savings generated by FIT income. This highlights the exceptionally complementary nature of solar PV and battery storage - it is important VAT reflects this and is reduced to 5% for batteries retrofitted onto existing solar PV systems (as is with new build), or solar PV and batteries all being reduced to 0% VAT. Solar is integral to the government’s smart energy plans for homes and businesses although there appears to be a reluctance to accept its importance. Identified within their July 2017 ‘Upgrading our Energy System: Smart System and Flexibility Plan’ are multiple examples of how solar is intrinsically linked to smart homes and businesses. The emerging smart homes and businesses will combine smart meters, solar and batteries as core components. However,


@thesolartrade

15

there remain significant barriers preventing uptake accelerating, reflecting the lack of Government support.

As well as numerous policy analyses, pilots are emerging which demonstrate the benefits this smart, integrated system could bring. For example, the Isles of Scilly has recently been pegged as ‘global test bed’ as a smart energy island, aiming to cut electricity bills by 40% by 20255. This is achieved in part through 74 domestic properties having solar installed alongside batteries. “Once all the low carbon infrastructure is installed by the autumn, the Isles of Scilly Community Venture will sell electricity generated by the solar panels and recycle the income to reduce electricity bills for all islanders through an energy tariff to be launched this summer”6. Frankly every energy scenario published today, from NIC to IEA, from Bloomberg to Shell – all recognise that solar, storage and smart management are cornerstones of the new energy system.

Absence of Competitive Market Offers for Local Solar Electricity

Evidence

The Call for Evidence recognises that there is currently no route to market for small generators, whilst this consultation proposes removing the export tariff. Our research supports the conclusion that there is no route to market under these proposed conditions. Indeed, analysis suggests that the minimum size of installation where currently onerous export metering costs/admin does not exceed the value of output is 30kW.

We surveyed over 10 of the key FiT Licensees and whilst many are naturally keen to expedite their offering of smaller scale export tariffs, the costs and administrative burdens of doing so prevented this. We found no examples of export tariffs that differ to the FiT scheme. One historic supplier offered an export tariff which differed to the standardised FiT export (they were offering an increased export rate to customers who signed up to them, pre 2010), but this ended quickly and remains the sole example. The existence of the FiT export was not once given as a reason why suppliers had not developed their own export tariff. Of the 51 registered domestic FiT Licensees (those we see as most likely to offer domestic PPA’s post-FIT), we found zero offerings of domestic PPA currently. Every supplier we asked who is considering offering one in future stated that these barriers could not be removed by the end of the FiT scheme, and the export tariff needed to be maintained.

STA members also echoed these views from the installer perspective, predicting systems less than 40-50kW would struggle to attract buyers for exported surplus electricity and even if found there would be a prohibitive cost associated as a result of metering and administrative fees.

Furthermore, the Council of the EU recently included in Article 21 regarding ‘renewable self-consumers’ a requirement that consumers ‘receive a remuneration, including where applicable through support schemes, for the self-generated renewable electricity they feed into the grid which reflects the market value and may take into account the long-term value of the electricity fed in to the grid, the environment and society.’ The UK’s failure to respect these provisions and instead to remove the export tariff before routes to markets are even viable will put UK consumers and the industry at a

5 https://utilityweek.co.uk/isles-scilly-become-global-test-bed-low-carbon/ 6 https://www.solarpowerportal.co.uk/news/solar_and_storage_installations_underway_on_smart_isles_of_scilly_project

https://utilityweek.co.uk/isles-scilly-become-global-test-bed-low-carbon/

https://www.solarpowerportal.co.uk/news/solar_and_storage_installations_underway_on_smart_isles_of_scilly_project


@thesolartrade

16

serious disadvantage. We would also question why BEIS is mooting departing from EU law, creating great uncertainty in the solar sector, when our Brexit deal has yet to be finalised.

Barriers facing emergence

Fundamentally it needs to be cheap and easy to bring domestic electricity to the market, which is not currently the case. There also need to be flexibility markets to make use of it. Again, these do not exist.

Regulation and Policy Barriers, Operational Barriers and Associated Costs

Even for existing homes with solar power there are problems with the enforcement of SLC 33 - This is the requirement to move solar owners off the deemed export tariff to metered export with the installation of a smart meter. There has been no consultation on this by BEIS despite your commitment to consult in your Response to the 2015 FIT Review consultation.

Firstly, difficulties arise due to SMETS1 meters reportedly not being able to provide a measurement for export or generation to solar owners or suppliers and SMETS2 roll out (which should have this functionality) being in a very nascent stage. SLC33 also currently has unclear connotations for co-locating batteries (with the potential for solar, battery owners to lose their export completely with this regulatory requirement) again disincentivising the desirable coupling of batteries, solar and smart meters. The obligation to move to metered (unless opted for by the customer) is premature and will be a disincentive to some customers to install a smart meter, preventing the roll-out from having the industry wide implementation it foresees. It is also prohibitive for suppliers who, if they are honest cannot say that consumers will not be worse off financially and are then mandated to meter export on incapable “smart” meters. Not surprisingly this has had poor consequences for consumers such that half of Which? customers with solar installing smart meters reporting problems. There is a wider concern that, given an export MPAN has to be raised (see below) the cost negates the value to the household. Some may not know they are losing out. This explains why we believe, if Government will not introduce a ‘smart Tariff’, deeming must be retained alongside the roll out of smart meters, until issues are resolved and we can be confident consumers will not be left out of pocket or frustrated by meter functionality.

SMETS1: The issues surrounding SMETS1 and exported electricity are likely on a longer timeframe than the smart meter roll-out. Enrolment and adoption is being developed later this year for SMETS1 to function within the DCC. This may resolve some of the issues solar owners face with SMETS1 installations – however, this is uncertain. What’s more, the back office systems within suppliers that have been developed for SMETS2 and DCC interaction will vary for the adopted and enrolled SMETS1 meters. Their full incorporation and functional parity equal to SMETS2 is estimated at a further 3-4 years. Until this point, unless replaced by a SMETS2, solar owners with these meters will have issues with measuring, accessing and being billed for their export and likely imported electricity. Currently suppliers vary in their costs of metering export; estimates given include £10 a month for a domestic installation for smart meter administration alone. This cost would completely remove the benefits associated with most installations metering their export, even if their self-consumption were minimal. However, once the systems above are in place and with the roll out completed, theoretically the costs of metering, data collection and aggregation and administrative billing should be massively reduced. These savings should then be passed on to consumers reducing the cost disincentive currently seen for metering export.

https://www.which.co.uk/news/2017/08/smart-meters-and-solar-panels-whats-the-sticking-point/


@thesolartrade

17

Second MPAN Requirement: For exported electricity to be valued properly it has to enter balancing and settlement. For this a second MPAN must currently be raised by the supplier by contacting the appropriate DNO. Progress has been made in formalising timescales for this within regulation; currently there is no standardised practice for how long this will take. Reports have indicated previously it could be months. Additionally, with the smart meter roll out being advanced and recommended to all solar customers, it is possible that all ~850,000 installations on the FiT scheme will have one installed, due to the SLC33 requirement aforementioned - on top of any new deployment post-FiT. There has been little advancement in how the supplier, DNO, MOA, DA/DC chain is going to cope with this level of MPANs to be raised. We echo Ofgem’s initial recognition of some of the costs relating to market-wide HHS of export:

o “These include: the registration of export sites (by assigning an export MPAN) which

have previously not been registered for settlement under the BSC, the registration of

new export sites and ongoing costs related to settling export sites”

Despite talking to a wide range of stakeholders, including BEIS, we have not been able to establish how much MPANs cost and where these costs fall. Our understanding is the process could be relatively expensive. We are currently exploring technical solutions around this, drawing on the situation in Ireland where only one ‘MPAN’ is required for recording both imports and exports, known as an MPRN. However, currently Elexon processes and software are linked to two MPANs, and so is network charging. So there is no solution on the horizon any time soon.

Export Half-Hourly Settlement: Whilst this is in scope of consideration in the relevant Ofgem review it is unclear whether or not mandatory export HHS is in the remit of the market-wide settlement reform, as highlighted in the most recent Business Case published. The BSC is typically distant from end consumers and there are concerns that mandating HHS export requiring consumers to sell their surplus electricity is beyond remit. We welcome Ofgem’s engagement with stakeholders on this issue and will respond in full to their questions in that publication. However, HHS export has not emerged voluntarily from suppliers in part due to the administrative burden and associated costs; our position is that mandatory HHS is necessary for smart tariffs, export TOUT’s, flexibility markets, peer-to-peer and other innovative new markets to develop - as well as making use of the smart metering infrastructure available. The value of domestic output to the grid will vary with different times and smart functionality gives them the ability to contribute electricity at valuable times for the system, which should be encouraged. We agree with the analysis in this publication that:

“Not moving to market-wide settlement reform would reduce take-up rates, increasing operating costs, slow reductions in upfront costs, and lengthen return on investment periods for battery storage and distributed generation, and subsequently slow down the rate of decarbonisation. Conversely, market-wide settlement reform could make batteries and distributed generation more viable than would otherwise be the case”. Neither this consultation nor the call for evidence places enough emphasis on the barriers facing the transition to a smart, flexible energy system – including, but not limited to, the barriers identified above. The government should work with us and other stakeholders to formalise a detailed plan to remove these barriers that have been highlighted in our responses and to BEIS in meetings. Without proper government coordination on these issues we see the development of smart homes and offices


@thesolartrade

18

as being drastically impeded. The value that the widespread development of smart homes and offices can bring is consistently being demonstrated through various reports. Ovo and Imperial College’s key findings highlight possible savings of £206 per household per year through electrification and decarbonisation, £3.5billion of savings possible through intelligent charging of EV’s and the aforementioned £6.9billion through residential flexibility per year. Prior to this, ARUP Future Energy Scenarios estimated smart homes could shave up to 17% off peak demand by 2035. Yet these system-wide benefits alongside the associated stacked revenue streams made available to investors through these services being monetised cannot materialise without the regulatory and policy barriers being removed. Fundamental to these scenarios is the commonplace emergence of solar and storage with exported electricity being brought to market through balancing and settlement via a second MPAN.

A better approach, to encourage smart homes As per our joint letter with over 250 organisations, it is essential to maintain the export tariff for exported electricity. Other countries’ governments provide an export tariff that suppliers then use to form the basis of their own offerings. This is also happening in the UK.

The export tariff should be made available with opt-out provision for all installations, consistent with the ethos that customers should be able to seek better offers as soon as they are available to the market. We would expect offers to be better since smart homes will be able to export power when it has maximum system value. They should remain able to opt-in to encourage competitive switching, akin to what is being heavily promoted in the import supplier market, as well as security that their tariff rate remains available should the supplier cease offering that price (for instance, no customer would switch away from a 20 year guarantee FIT export if they were not able to return if a supplier is no longer able to offer a year by year export rate of more value for instance).

Deemed %

Currently set at 50% with the government suggesting that customers exports are overestimated leading to unfair higher bills for the rest of the population. STA members are producing up to date accurate modelling on self-consumption to aid these outdated government estimations. Self-consumption models indicate a more accurate estimation for solar households at below 50%. This should be amended for solar and an additional deeming rate provided for homes that also have battery systems. Evidence is still being accumulated for this modelling (we are working with Loughborough University) and we urge government to use this as the basis for a deemed approaches while the barriers to export metering above are resolved. We would expect to see the smart meter roll out continue alongside this.

Export Price

Departure from current arrangements needs very careful consideration – any changes would require as little disruption as possible to the entire supply chain that seeks certainty and stability going forward.

As per our letter signed by over 250 organisations, we would welcome an interim incentive to encourage homes to be ‘smart ready’, including smart meters and metered export. This would mean households are recompensed for the costs associated with the barriers above, until their removal. One


@thesolartrade

19

way to do this would be to provide, on a short term basis, a higher export tariff to homes installing solar, storage and smart metering with metered export. Regardless of what combination the government finalises on, what is most important is making clear as soon as possible that a fair export tariff will be available when the FIT generation tariff ends in March.

The Government needs to consider very carefully what message it will be giving out to consumers and the transition to the smart energy system if it effectively makes their power the only worthless power in the electricity system. There is a real danger of fostering a deeply negative perception of engagement with the system and a ‘self-sufficiency’ approach that will undermine the shift to a smart energy system. The smart agenda is already very complex for consumers to navigate and Government should be working hard to ensure a smooth customer journey and positive engagement with the grid.

Q2. Do you agree or disagree with the administrative closure and exception arrangements? Please explain your reasoning

The STA believes it is inherently unfair that any applicants in queues for deployment may not have the ability to install due to these arrangements. Any project in a queue should without question be able to install regardless of technology or capacity space. Particularly affected is standalone solar, as well as other technologies bands. Considering the available capacity in other deployment bands that the government recognises, we see it appropriate that this capacity, already dedicated to specific technologies with an allocated budget, should be reallocated to where there is a queue, if this spare capacity is not filled in the coming months. It is surely contrary to government’s stated low-carbon ambitions that technologies and bands which are able to continue to deploy, despite the low FiT income, are penalised further. Stifling bands managing deployment in a year where installations and capacity has reached an all-time low goes directly against government intentions for a clean electricity supply. The government should do more to improve transparency within the FiT queue process. Projects are currently able to submit more than one planning application which has the potential to create unnecessarily longer queues, denying some projects accreditation status. The standardised validity periods are appropriate in some circumstances. However, in circumstances where development towards FIT accreditation has been made and this has been stalled through no fault of the project there should be lee-way with ability to attain generation and export. At the very least, as in line with other renewable policies such as RO, grace periods should be implemented for projects unavoidably delayed in accrediting.

Q3. Do you agree or disagree with the proposal to levelise net metered export payments? Please explain your reasoning

The STA agrees with the proposal to levelise net metered export payments. This is due the risks associated with not doing so, particularly with regards to suppliers. The costs of bringing electricity onto the market when metering export are significant to suppliers, especially smaller ones. Metering export is dependent on smart meter infrastructure and back office programming and processes being implemented and standardised, which currently is not developed or available even to the larger suppliers. The costs associated (as outlined in the call for evidence) are currently high for metering export, meaning that Government policies are at odds with each other. As it stands, the suppliers expediting moving customers away from deemed and onto metering are bearing significantly higher risk and costs due to the fact metering export is not included in the levelisation process in the same


@thesolartrade

20

way as deemed. This means that currently the exclusion of metered exports from levelisation acts as a disincentive to suppliers to encourage metering. Further to this, it is dis-incentivising suppliers from engaging with small-scale generation with one reported supplier perceiving the risk of metering export (with the regulations as they are) as too high to be worth being part of the scheme. One consequent result is that export metering may not be implemented in a cost effective manner for consumers. This also leads to a potentially less competitive FiT market, which could result in lower standards of service

to generators.

The inclusion of metered export in levelisation would remove one barrier to customers and suppliers opting to meter their export. The inclusion of this in levelisation would provide the platform for these back office systems to be standardised. This taken concurrently with more solar owners having smart meters installed will provide the platform and appropriate incentives for more suppliers to formalise their own offering of an export tariff. Including metering within levelisation is one way that the government can speed up further routes to market alongside the export tariff, and thus will be a driver behind the move to smart and flexible tariffs. Not doing so will see the rate of development towards metering export to continue at the very poor rate to date. Q4. Do you agree or disagree with the use of the average time-weighted System Sell Price to determine the value of metered export to FIT licensees? Please explain your reasoning. The system sell price is what other generators receive for the electricity they produce outside of the contract and thus a fair valuation of exports for FIT licensees. However, as highlighted before, the STA is keen to see metering export become standardised – thus to facilitate this, on a short term basis, a higher export tariff to homes installing solar, storage and smart metering with metered export could be made available. Q5. Do you agree or disagree with the proposed calculation Ofgem would use to make the necessary adjustments to quarterly and annual levelisation payments? Please explain your reasoning

No comment at this time.

Q6. What would you expect the likely replacement rate for generating plant to be, for each FIT supported technology, if the rules were changed to allow unlimited replacements? To what extent would load factors change? Please provide evidence.

The replacement rates for generating plants are not frequent and according to member installers this is a very small issue. We think and hope this questions relates mostly to other technologies. The components most commonly in need of replacement are inverters with an average lifetime ranging from 5-10 years (depending on quality). Comparatively solar panels typically have a lifetime of 25 years. Yet even with inverters being replaced most frequently, installers quote only ‘a handful’ of cases per year. Replacements can often be done like-for-like where there would be minimal to no change in load factor. However, some cases do emerge where the original part is no longer available or it is not possible to economically or safely replace faulty equipment with exactly the same specification, meaning an “upgrade” is unavoidable. Load factor changes are affected through other factors such as environmental and operational conditions, as highlighted by BEIS’s paper on this in 2017, whereas component replacements could only affect them at most marginally.


@thesolartrade

21

More of an issue is that customers are struggling to have their broken systems repaired and maintained. This has been brought about by policy volatility resulting in a significant number of industry firms forced to shut down (see graph for registered MCS installers declining). Consequently, many with solar PV can no longer use their original installer to repair their systems. Another installer opting to repair a system not their own is fraught with risk and liability they may not feel comfortable shouldering. The STA is working on guidance on this issue; however, it is important that the government act on removing this regulatory barrier preventing replacements consumers require for their systems. It is unacceptable that if, on top of these difficulties, households with faulty systems also have to contend with a risk to their FIT payment. The struggle facing consumers to attain the maintenance they need for their installations will only be exacerbated by the decline in legitimate installation businesses that the surveys aforementioned see as inevitable. This is a huge concern for those with installations and the industry as a whole.

Equally concerning for maintenance as well as new installations is the lack of consideration this consultation and the government has shown for how to ensure standards in the industry are maintained. MCS is required to attain FiT accreditation and payments and thus has played an important role in ensuring high quality installations. The removal of FiT completely would see an end to the requirement of MCS. The cost of this scheme (which currently acts as a deterrent to lower quality ‘cowboys’), which have recently been significantly increased, makes it certain without mandatory implementation MCS will not be widely used, ending its status as a meaningful standard. Not only will this have damaging implications for the quality of installations and consumer protection, but government will also lose the only source deployment tracking. There is no current solution of how tracking of solar will continue post-FITs, which given the already significant grid constraint issues with distributed generation is particularly worrying. We implore government to tie MCS requirement to the continued FiT export tariff or grid connection agreement to ensure its continuation. We also want to see an MCS requirement for any repair or maintenance for existing FiT installations, as this will help deal with preventing mis-selling mentioned above. The inclusion of storage to MCS would also aid tracking ES deployment and ensure the standard is extended to this newer technology. Work should also be done to remove any double requirements as is currently the case with MCS and building regulations; streamlining this standard would prevent MCS being a hindrance to legitimate installers

functioning post-FiT and so is of paramount importance.

Q7. What would the impact be of not allowing replacement of generating plant? Please provide evidence. Homeowners and businesses invested in the FIT scheme with the understanding this investment would last the contracted length of time. The considerable investment in solar undertaken by these engaged and active prosumers was done on the basis of a contract for 20-25 years. Not providing the security and ability to service and maintain systems at best is an oversight and at worst immoral, contradicting BEIS and Ofgem’s confirmation that ‘it is not the Government’s policy intent that generators be prevented or deterred from undergoing refurbishments or equipment replacement’. FiT investments will have been budgeted for based upon the 20-25 year contract expected, which means losing accreditation after repairs and replacements is of significant detriment to customers. What’s more, investment in solar already came at considerable upfront cost and the economic benefits in upgrading a system to improve yields do not outweigh the costs of component replacement - as yields will only be increased by a few % at most. Installations are only upgraded with components when absolutely necessary and when the installer does not have access to original parts installed.


@thesolartrade

22

Members have voiced a small number of cases where parts of installations have been broken or stolen and the component installed originally is not available anymore. The stress and panic caused to these customers that through no fault of their own they may lose their FiT payment as a result of the new component installed is unacceptable. For smaller installations, the decision of re-accreditation with replacement parts is currently left up to the discrepancy of the FIT licensee, on a case-by-case basis. There is limited to no regulations on how these decisions are made or any track record of when they are rejected or accepted and on what basis. As with any generating plant that breaks or requires some form of replacement this would entail installations not being able to function at all or at limited efficiency. This would result in less low carbon generation being generated from the system and could pose potential safety hazards. Additionally, on a personal level, not allowing this replacement is a huge disincentive for investment, especially if cases of this were picked up by the appropriate media covered. The impact this could have on the industry and government reputation on this topic unnecessarily could be significant.

Other generators that face these replacement issues are not subject to the same scrutiny. If replacements to the new Hinkley Point C generator during the 35 year contract, the strike price of £92.50/MWH would not be questioned as being open to change.

Q8. How can government ensure that any budgetary impact from allowing the unlimited replacement of generating plant can be controlled in an administratively practical manner?

Firstly, the budgetary impact will be limited by the miniscule amount of cases this would affect. Secondly, for those that it does, where the TIC is not replaced entirely as like for like, systems should receive their original FiT on a pro-rata basis against their original TIC. Any additional capacity exceeding this cap would thus not be subject to FIT payments – in line with existing regulations on extensions. This would follow the same process as set out in the following supplier license condition7 – 10.3A In the event that the output of an accredited FIT installation and an installation that is not accredited is not being separately measured, in calculating FIT Payments, the Mandatory FIT Licensee shall pro-rate the amount of electricity generated or exported by reference to the Total Installed Capacity of the accredited FIT installation. Both these factors would ensure that the budgetary impact for allowing unlimited replacement would not be significant, whilst remaining practical administratively for the FiT Licensee.

7 Ofgem (2016) Electricity Supply Standard License Conditions Consolidated


@thesolartrade

23

List of Acronyms

Acronym Meaning

VtG/V2G Vehicle to Grid

TOUT Time Of Use Tariffs

IRR Internal Rate of Return

ECA Enhanced Capital Allowance

BOS Balance of System

PPA Power Purchase Agreement

SPP Solar Power Portal

GSP Grid Supply Point

GDUOS Generator Distribution Use of System

SLC Supply License Condition

SMETS1/2 Smart Metering Equipment Technical Specification (standard smart meters installed)

DCC Data Communications Company (manages the data and communications network to connect smart meters to the business systems of energy suppliers, network operators and other authorised service users8)

DNO Distribution Network Operator

MOA Meter Operator Agent

DA/DC Data Aggregators/Data Collectors

(M)HHS (Mandatory) Half Hourly Settlement

BSC Balancing Settlement Code

IA Impact Assessment

8 https://www.smartdcc.co.uk/about-dcc/

https://www.smartdcc.co.uk/about-dcc/

Documents

onsultation on the Feed In Tariffs Scheme€¦ · onsultation on the Feed-In Tariffs Scheme Response on behalf of the Solar Trade Association About us Since 1978, the Solar Trade