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Achieving subsidy free renewables

We’ve found that 3GW of new installed capacity of solar PV in the domestic, school and community sectors would only cost bill payers around 24p a year.[1] This is roughly equivalent to the capacity of the Hinkley Point C nuclear power plant (3.2GW).

And with our suggested tariff rates and a refocusing of FiTs to households, communities and schools we can strike the right balance of affordability and support the sectors most in need. This will help the renewable industry become subsidy free and avoid the job losses that the proposed FiT review changes would have entailed.

Following our briefing on the feed-in tariff review we now have conducted an in-depth analysis on what the feed-in tariff (FiT) review changes could mean for renewables deployment in the UK. We have also updated our briefing document to include our analysis and some number crunching.

 

What’s at stake?

Community Energy England recently found that 90 per cent of community energy groups said their projects, which represent £127m of capital investment, are under threat. On top of this 91 per cent say their ambitions have been jeopardised by the FITs review, meaning a further £242m of investment will not be made in renewables.

Until a few months ago, it was fair to say that solar PV was a renewables success story in the UK, with 700,000 homes and small buildings fitted with solar PV as a result of FiTs.

But around four million UK homes could still install solar PV, so as long as we continue to provide the support to bring prices in line with grid parity levels a much bigger solar transformation of our homes could be possible over the next ten years.

We believe that we can and should be aiming for small scale renewable energy generation to operate in the near future on a largely subsidy-free basis. The transition to subsidy-free renewables needs to take place gradually. We accept the government wants to cut the cost of the FiT scheme however we are worried that drastic cuts at this point in time put at risk the great progress we’ve made in developing a renewable industry with competitive products.

In the community energy sector in particular, exciting new models of energy supply and demand management have been emerging in recent years with the strong support of the government. That growth and creativity in community energy has been strongly driven by the FiT, which has provided a stable income stream for groups and projects.

 

What do we propose?

Our proposals, we believe, will ensure that the FiTs expenditure is reduced while achieving a wider social benefit. We suggest that government should be aiming for a revised FiT programme that can enable the residential, community and schools sectors to make a smooth transition over the next few years from FiTs to cost-effective, subsidy free renewable installations.

We will soon publish a full set of suggested tariff rates that will show how domestic, communities and school sectors can achieve their full potential, all the while making energy bills more affordable for hard-working families.

Our proposal for domestic scale is to reduce the feed-in tariff from the 12.47p/kWh to 5.25p/kWh, instead of the proposed 1.63p/kWh. This tariff will be sufficient to continue to make smaller installations an attractive proposition and will require installers to cut the costs of panels to a level that we believe is challenging but realistic.

Some other adjustments to the rules of the scheme would also be necessary:

  • Metering of export generation for all future installations (rather than just assuming that 50% of energy is exported as currently – this will require all future installations to be fiited with an export meter)
  • Export payments are continued for the full 30 year life of the system

 

What would it mean and how much would it cost?

The total net cost to the electricity supply industry of this 3GW of installations over their combined 35 year lifetime is £635 million. Sharing this cost between all electricity users in Great Britain and averaging out over the full 35 years will only result in an additional cost to each household of around 24p a year.

For this small cost the UK would be able to get an additional 3GW of renewable energy, which we believe is very good value for money, especially in light of the important social benefits borne through small scale solar installations for homes, schools and communities.

These wider benefits include the energy efficiency installations that can be triggered by people’s and communities’ engagement with renewable energy, improved awareness of renewable energy generally, providing energy advice to fuel poor households in the community and the income stream from FiTs can also be used to pay for other projects that benefit the community.

Crucially this level of deployment gives the UK solar PV sector the opportunity to reduce costs to a competitive level so that beyond 2021 it would be able to stand on its own two feet and be ready for the decarbonisation challenge the UK faces in the 2020s. It will also mean that communities are given stability and a chance to develop at a crucial point in their growth.

 

[1] An estimate of the cost of any scheme will depend on different assumptions, particularly around the changing technology prices. It will also depend on the exact rules of the scheme. Our assumptions can be seen in our updated briefing document. 

Our Head of Policy, David Weatherall, is one of the Energy Saving Trust’s most experienced spokespeople and has worked on the policy issues around energy efficiency for more than ten years. Follow David on Twitter: @Atrapalhado
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