Response to DECC fast-track review

8/7/2019 Response to DECC fast-track review

http://slidepdf.com/reader/full/response-to-decc-fast-track-review 1/5

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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



aee-renewables.co.uk

(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




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




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




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

Documents

Response to DECC fast-track review