Renewables subsidies - is time running out?

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News article

Renewables subsidies - are we running out of time?

October 2011

renewable energy news

Despite a lower than expected reduction of the Renewable Obligation Certificate (ROC) by the Government on 20th October, there is still cause for concern for many renewable investors as the announcement of the revised Feed in Tariff (FIT) is delayed further.

The ROC reduction from 1.0 ROC to 0.9 ROCs was welcome news for on-shore wind farm companies who were anticipating a reduction to 0.8 ROCs. This would have made a lot of proposed wind farms south of the Scottish border unviable.  Wind farm companies receive the wholesale price of electricity, plus the ROC payment, worth in total about £100 per MW/hr. This total reduction is only about 5% and should not stop the development of wind farms, which is also good news for landowners who want wind farms on their land.

More concerning to land and property owners is the delayed announcement for the revised FITs. The consultation should have come out some time ago, with rates being finalised by the end of the year to begin on 1st April 2012.  This delay is because OFGEM are 3 months behind knowing what renewable projects are registered.  
 
There were concerns that too much of the FITs were taken up by solar PV, with a reported 97% of all FIT uptake in September coming from PV installations. The DECC did a fast track review, reducing the FIT payments for larger projects up to 5MW, so that only solar projects below 50kWs were viable.  This killed the big 5MW solar parks, but many projects were completed before 1st August deadline. This used up a lot of this year’s £80 million FIT allocation, together with a large number of smaller solar projects since then.
 
The DECC are reviewing of all FITs projects and if this year’s allocation has been used up, then they can bring in a 6 week fast track review early, rather than waiting for the 1st April 2012 date. However, they have said they would like to keep the rate unchanged to April “unless the review indicates the need for greater urgency”.
 
The solar PV market has grown far faster than the Government expected, helped by solar PV prices coming down by 60% over the last two years.  With advertisements for “free electricity” from solar PV installed at your property, an unsustainable market has developed that is likely to see FIT payments drastically reduced. Speculation that a reduction of up to 75% could occur which would see a payment of 43p/kWh go down to 9p/kWh. This would cause a major blow to the solar PV market. 
 
Mark Newton, Head of Renewable Energy at Fisher German, believes that the delay to the FIT payment announcement will cause many people to run out of time to have solar PV installed on their property. He comments “Planning permission typically takes 3 months for a solar project on a commercial or agricultural building. Residential property does not need planning permission provided they are not listed or in a conservation area.  
 
“A grid connection can take 6 – 8 weeks, so even if the FITs review is delayed until 1st April, then time is already running out. We believe a 6 week fast track review could change FITs rates long before 1st April.  Some solar installers are telling us that the last orders they are taking are by the end of October, as they do not want to be holding a large stock of solar panels they cannot use.
 
“The continued uncertainty and changes to FITs rates is denting confidence in other renewable projects that have a much larger lead in time.  For example, a medium sized wind turbine takes 18 – 24 months to go through all the planning and grid connection hoops.  What we need is a system that owners can apply for a FITs rate before they start an expensive project, get the rate fixed so that there is certainty on the FITs income when the project is completed.
 
“If you are thinking of investing in a solar project then act immediately as this is a one-off opportunity to get a 10-15% return that will certainly disappear on 1st April or earlier."
 
For further information, please contact Mark Newton on 01858 411246 or email mark.newton@fishergerman.co.uk
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