The New Solar Gold Rush

On the 10 March 2011 Chris Huhne, Secretary of State for Energy and Climate Change announced the details of the long awaited Renewable Heat Incentive (RHI). What can we expect and how does it affect PV?

The scheme will be introduced in two phases. in the first phase, long-term tariff support will be targeted in the non-domestic sectors, at the big heat users – the industrial, business and public sector – which contribute 38% of the UK’s carbon emissions.

Under this phase there will also be support of around £15million for households through the Renewable Heat Premium Payment. The second phase of the RHI scheme will see households moved to long-term tariff support similar to that offered to the nondomestic sector in the first phase.

This transition will be timed to align with the Green Deal which is intended to be introduced in October 2012.

From July 2011, renewable heat producers in the industrial, commercial and public sector will be paid a “tariff” for every metered unit (kWh) of renewable heat they produce. For the first 15 months, over one quarter (£15m) of the first year’s funding (just under £60m) is ring-fenced for residential renewable heating systems through a “Renewable Heat Incentive Premium”. This first year funding will be distributed according to more detailed eligibility criteria to be published in May 2011.

All eligible systems installed since 15 July 2009 will be entitled to receive RHI payments, including households who also benefit from the Renewable Heat Incentive Premium during the first 15 months. Newbuild residential renewable heating systems are not included in the first phase, but will be considered 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 majority of household and small scale installations are safe until at least April 2012, since the sub 50kW segment is not included in the Fast Track Review, these cuts would exclude numerous groups from participating in the Government’s decentralised energy revolution. Reduced tariffs would appear to render many schools, hospitals and community schemes financially unviable and stop scale solutions in their tracks.

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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 citizen engagement, may well not survive if these proposals go ahead. The 50kW plus sector may well wither on the vine: many jobs will go and businesses will see demand dry up.

Indeed, the review of all solar PV above 50kW came out of the blue. Setting the threshold at this level is counterproductive in terms of Government’s aim to promote an ambitious roll-out of decentralised domestic and community-scale technologies.

The proposed tariff reductions will affect investor confidence badly investor confidence in the sectors affected.”

Despite uncertainty over the future of the FITs, Ray Noble, solar PV specialist at the Renewable Energy Association is still optimistic about the UK solar PV opportunity. He is predicting 400-500MWp will be installed in 2011/2012, and urging European organisations not to abandon their UK plans as he explains:

“The 4.8% increase to the FITs has surprised many people as they didn’t expect the tariffs to be index-linked from day one. When the FITs were introduced in April 2010 most people believed that the rates were fixed for the first two years and only index-linked once an installation was signed up to receive the tariffs.

“It’s a significant increase that’s made the UK PV market a more lucrative place to be at the moment. And for the next few months it will create a solar ‘gold rush’ across the country. The domestic market will continue to accelerate and take advantage of the increased tariffs. And i’d expect to see a surge of larger projects pushing to get arrays over 50kW signed up before the 1 August, when any changes from the Government’s fast-track review come into effect.

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“There’s been a lot of speculation about the fast-track review and most of it isn’t true. When the FITs were first introduced, immediately there was huge interest for 5MW solar farms and large roofs as well as complete social housing estates.

This surprised the UK Government as they didn’t think solar PV was capable of being a big power generator like other renewable energy technologies such as wind and tidal. Unfortunately the Government did not compare the UK light levels with Germany, which are very similar. The result has been that the Government allowed for only 4kWp projects in their budget for the first four years compared with industry wanting to install up to 5MWp projects. This has caused the problem as although the present Coalition Government knew this was happening they submitted a domestic scale budget into the Comprehensive spending Review. however rather than admit their mistake the minister has elected to trim the solar industry to match his budget. After waiting for over ten years for a FIT, the industry, that is no longer a little cottage industry, is fighting back to make its case.

“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 review is specifically 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 help address the energy gap. The tariffs that the Government has suggested in its consultation document are just a joke and do not reflect prices in the industry.

Prices have fallen by over 30% in the last year, and tariffs could be and should be adjusted, but reducing tariffs by over 70% as the Government is proposing is just silly and shows the Government is not talking to the industry.

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“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 advice to them would be that if you can afford to operate in a market installing under 50kWp, come over. it’s a great time to build your brand and get ready to take
advantage of the wider market opportunity once there’s more certainty over small generation arrays.

“I don’t think the fast-track review has had a huge impact on the industry and i believe the market volume will remain balanced. There are still huge opportunities for public buildings, like schools, hospitals and social housing, and within retail.

Each roof counts as a separate installation so instead of having one large array, it can be split up into several smaller ones to stick within 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 houses and retail outlets with the remaining 100MWp on a few large roofs or solar farms located on ex-industrial sites which the UK, with its heritage, has many suitable sites.

“We are finding that this Government, although fully committed to the FITs prior to the election and in fact suggested raising the maximum size project to 10MWp, are now trying to back track and suggesting it was always considered to be a domestic market. The industry is now stronger than the previous cottage industry and will fight the Government on this issue, as they are the one that made the mistake, the industry always knew the full potential solar can bring to the UK. Watch this space as we intend to raise the awareness of this Government error!”

Contact Full details on the tariffs for all microgeneration technologies can be found on Ofgem’s website or visit the Renewable energy

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