Out-Law News 2 min. read
07 Mar 2012, 9:57 am
Responding to a written Parliamentary question from Green MP Caroline Lucas, Barker said that the lifetime cost of providing a 43.3p/kWh feed-in tariff (FiT) to people and businesses who generate their own electricity using solar photovoltaic (PV) equipment would be considerably less than the initial £1.5 billion estimate of the Department for Energy and Climate Change (DECC).
However, he said that costs would have been considerably higher if the Government had not sought to appeal the Court of Appeal's January finding that its plan to introduce the cuts to all schemes completed after 12 December 2011, 12 days before its consultation on the proposed new rates, was unlawful.
Seb Berry of Solarcentury, one of the companies that took the Government to court over its decision, said the revision showed that the initial "shock tactic" figures "didn't stand up to scrutiny".
"Analysis and decision-making like this just undermines trust in Government," he told environmental affairs website ClickGreen.
The Government said that its overall budget for the scheme for the current spending review period up to 2014/15 was already "fully committed" because of higher than expected take-up of the subsidies in a response http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenvaud/1858/1858.pdf to criticisms of its handling of the cuts by two House of Commons committees, published this week.
It predicted that additional costs of around £460 million over this period would be covered by underspending on support for larger projects under the Renewables Obligation (RO), which is the main financial support mechanism used to encourage the development of large-scale renewable electricity generation projects. However, it added that there would not be "any lower deployment of large-scale renewables" in order to pay for the FiTs scheme.
FiTs provide financial incentives to businesses and individuals that generate electricity from renewable sources, and vary according to the technology used.
Energy law expert Peter Feehan of Pinsent Masons, the law firm behind Out-Law.com, said that there were much bigger obstacles to large scale solar projects than FiTs. Projects over 250kW capacity will see rates cut by 72% to 8.5p/kWh when the reductions take effect from 1 April.
"The tariff for large scale has reduced to such a level that the FiT alone does not make these schemes viable. They need to demonstrate an 'offtaker' for the power in order for the financial appraisals to actually stack up," he said.
It "remains to be seen" whether changes to the renewables obligation certificates (ROCs) would ultimately provide a more stable funding mechanism for larger projects, he commented. "That said, we have seen that issues such as grid connection and other consent and planning issues present just as significant a barrier to getting these schemes going as reducing FiTs," he said.
Last month, DECC published a consultation on the second phase of its review of the FiTs scheme as well as further proposals on FiTs for technologies other than solar PV and scheme administration issues. These documents address the House of Commons committees' criticisms by "improving the predictability" of the FiTs scheme, the new report said. They also "include proposals for a new cost control mechanism, resonating with the joint report's emphasis on the need for certainty".
"The proposed approach should provide a reliable method of financial control while at the same time giving a good measure of certainty to the sector and to consumers about the future path of tariffs. Additionally, we are proposing that the Government would carry out annual reviews... to check if this mechanism is controlling costs to an adequate extent," the report said.
