New Feed in Tariffs in 2014
Recent figures announced from the Department of Energy and Climate Change (DECC), showing deployed and pre-accredited capacity under the Feed in Tariff (FIT) scheme up to September this year, indicate that several renewable technologies have now exceeded their 20% degression thresholds. All wind turbines (up to 5MW) and Anaerobic Digestion (AD) up to 500kW will be affected by a 20% reduction in tariff rates from April 2014, however this is the maximum degression level and will not be exceeded.
Deployed hydro capacity has already exceeded the 2.5% degression threshold and this is likely to reach the 5% threshold by the end of the year. The FIT rates for AD installations between 500kW – 5MW will be reduced by at least 5% from next April.
Figures for Solar PV are subject to more frequent changes, with degression based on quarterly deployed capacity figures. The data from DECC shows that for the period July – September 2013 there was not enough deployment of PV installations up to 50kW to trigger any degression. Current tariff rates will remain the same until early 2014, but a degression level of at least 3.5% will take place from April 2014. PV installations over 50kW will be affected by a mandatory 3.5% reduction in FIT rates from January 2014.
These changes reiterate the importance of gaining Preliminary Accreditation, if you have planning permission and a confirmed grid connection for your project. Applications for Preliminary Accreditation received before 31 December 2013 will enable landowners to lock in to the current higher FIT payments for a period of time, while a project is installed and commissioned. This is especially important for wind turbine projects and anaerobic digestion up to 500k, given the now confirmed 20% degression. The validity period for this tariff guarantee is 6 months for PV, 12 months for Wind/AD and 2 years for hydro technologies.
Mark Newton, partner and head of renewable energy at Fisher German, said it is likely wind turbine projects on lower wind speed sites would not be as attractive from next April; however, good rates of return will still be achievable when turbines are correctly positioned, on sites with good wind speeds.
He added: “We would hope that when the feed-in tariff rates do come down, that there will be a reduction in the price of wind turbines to ensure the UK market for wind is still viable but this is not guaranteed.
Historically, as feed-in tariff payments have gone down this has been partially offset in the last three years by increased savings through on site electricity usage, and as energy prices continue to increase above inflation. The income from electricity export also continues to increase, with up to 6p/kWh now being achievable through a power purchase agreement (PPA).
We would urge landowners to seek expert advice to take financial advantage of the current higher feed-in tariff payments, and ensure that the best rates of return are achieved as feed in tariffs decrease through degression.”
For further information, contact Mark Newton on 01858 411215 email firstname.lastname@example.org
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