The long-awaited Renewable Heat Incentive was unveiled by Chris Huhne, Secretary of State for Energy and Climate Change, on March 10th, 2011. (RHI). What can we expect and how does it effect PV?
The scheme will be deployed in two phases. Initial support for long-term tariffs will go to the UK’s biggest heat users (industry, commerce and government), which account for 38% of the country’s carbon emissions.
Households will receive roughly £15 million in help through the Renewable Heat Premium Payment during this time period, as well. The second phase of the RHI plan will see households shifted to long-term tariff support comparable to that offered to the nondomestic sector in the first phase.
This shift will be timed to correspond with the Green Deal which is intended to be enacted in October 2012.
Industrial, commercial, and public sectors will begin receiving a “tariff” in July 2011 for each kWh of renewable heat they create that is metered. For the first 15 months, over one quarter (£15m) of the first year’s funding (just under £60m) is ring-fenced for domestic renewable heating systems through a “Renewable Heat Incentive Premium”. More specific eligibility requirements will be revealed in May 2011 before the first round of funds is distributed.
All qualifying systems installed since 15 July 2009 will be entitled to receive RHI payments, including families who also benefit from the Renewable Heat Incentive Premium for the first 15 months. Newbuild home renewable heating systems are not included in the first phase, but will be examined for inclusion from October 2012.
The Micropower Council, a cross-industry body representing installers, manufacturers, distributors, trade associations and others with interests in sustainable energy production in the built environment are very concerned by proposals to reduce financial support available via the Feed-in Tariff for built environment installations over 50kW, under proposals in the consultation published today on the fast track review of the scheme. Although the bulk of household and small scale installations are safe until at least April 2012, since the below 50kW sector is not included in the Fast Track Review, these changes would preclude numerous groups from participating in the Government’s decentralised energy revolution. Reduced prices would appear to render many schools, hospitals and community initiatives financially unviable and stop scale solutions in their tracks.
Dave Sowden, chief executive of the Micropower Council, commented: “Whilst we are relieved that the sub 50kW sector has been left untouched for the time being and that installations already accredited will not be affected, we are surprised and concerned by the depth of proposed cuts to all scales of built environment solar PV. Numerous built environment installations, including community projects at the very heart of public involvement, may certainly not survive if these proposals go ahead. For numerous reasons, the 50kW+ industry is in danger of going extinct: many jobs will be lost and firms will witness a decline in demand.
The examination of all solar PV systems with capacities more than 50 kW came as a surprise. The government’s goal of promoting an ambitious rollout of decentralised home and community-scale technology will be harmed if the threshold is set at this level.
The planned tariff reductions will influence investor sentiment severely investor confidence in the sectors affected.”
The Renewable Energy Association’s Ray Noble, a solar PV specialist, is upbeat about the UK’s solar PV opportunity despite the uncertainties surrounding the future of FITs. A 400-500MWp power plant is expected to be built in 2011/2012, and he is asking European organisations not to abandon their UK plans.
Since no one expected tariffs to be index-linked from day one, the 4.8% hike in the FIT has taken many by surprise. A common misconception about FITs was that they would be index-linked only once an installation had signed up to receive them, which was widely assumed when they were first launched in April of that year.
“The UK PV market is now more profitable because of the large increase. And over the next few months it will trigger a solar ‘gold rush’ across the country. The domestic market will continue to accelerate and take advantage of the increasing tariffs. And i’d expect to see a spike of larger projects pushing to get arrays over 50kW signed up before the 1 August, when any modifications from the Government’s fast-track review come into effect.
“There’s been a lot of speculation about the fast-track review and most of it isn’t true. Solar farms with capacities of 5 MW or more, enormous rooftops, and entire social housing estates all attracted considerable attention when the FITs were originally introduced.
Because they didn’t expect solar PV could be a large power generator like wind and tidal, the UK government was taken aback. Unfortunately the Government did not compare the UK light levels with Germany, which are fairly similar. The outcome has been that the Government approved for just 4kWp projects in their budget for the first four years contrasted with industry wishing to install up to 5MWp plants. This has produced the dilemma as although the existing Coalition Government knew this was happening they filed a domestic scale budget into the Comprehensive Expenditure Review. However, the minister has chosen to cut the solar business to meet his budget rather than accept their error. With nearly a decade to wait for a FIT, the now-large cottage sector is taking a stand to make its cause.
“However, the Government has now woken up to its potential and are seeing PV differently; believing it now has a more meaningful place in the power generation market. The fast-track study is explicitly looking at ‘small generation’ – 50kWp to 5MWp – to evaluate solar PV in line with other technologies and decide how they can sustain the tariffs for the long-term and assist address the energy deficit. The tariffs that the Government has suggested in its consultation document are merely a joke and do not represent prices in the business.
Nearly the last year, prices have dropped by more than 30%, and tariffs might and should be changed to reflect this. However, the government’s proposal to reduce customs by over 70% is absurd and demonstrates that it is not talking to the industry.
“The announcement about the fast-track review has unsettled many organisations, especially those based in europe who are looking at opening new UK offices to take advantage of the solar opportunity. My recommendation to them would be that if you can afford to operate in a market installing under 50kWp, come over. As the future of tiny generating arrays becomes clearer, now is an excellent time to establish your company’s brand and prepare for future growth.
My prediction is that there will be no significant changes in industry due to this fast-track assessment, thus the market volume will remain stable.” There are still tremendous prospects for public buildings, such schools, hospitals and social housing, and inside retail.
Each roof qualifies as a distinct installation thus instead of having one enormous array, it may be broken up into multiple smaller ones to keep inside the safe 50kWp limit for micro generation.
“We’re still optimistic about the UK solar PV market, and believe that for the next FIT year (1 April 2011 to 31 March 2012) we will see 400-500MWp installed. Of this, 300-400MWp will be on public buildings, domestic residences and retail outlets with the remaining 100MWp on a few huge rooftops or solar farms built on ex-industrial grounds which the UK, with its legacy, has many suitable sites.
It appears that the government is now trying to backtrack and say that the FITs were always considered to be a domestic market, despite the fact that they were fully committed prior to the election and even supported expanding the maximum capacity project to 10MWp. Despite the fact that the government committed a blunder, the sector was well aware of the enormous benefits that solar energy may bring to Britain and is prepared to take the fight to them. Watch this space as we want to increase the notice of this Government error!”
Contact On the Ofgem or Renewable energy websites, you can find complete information on the rates for all microgeneration technologies