Feed-in tariffs for large solar projects to be cut – solar groups challenge withdrawn

The Department of Energy and Climate Change (DECC) will introduce cuts to feed-in tariffs (FITs) on 1 August 2011 after its fast-track review of the scheme (44-page / 280KB PDF).

The changes are a result of concerns that the number of large-scale solar projects taking advantage of FITs is larger than anticipated and that demand for tariff support has outgrown the funding available.

However the DECC will increase the financial subsidies available to users of anaerobic digestion technologies, which create energy from waste material, as a result of the review.

The changes will not affect existing members of the scheme. Only new entrants from 1 August 2011 will be subject to the new rates.

The FITs scheme was introduced on 1 April 2010 to encourage businesses, communities and individuals to generate their own electricity through renewable methods.

It allows people to earn money for any surplus electricity generated, which is transferred back to the national grid.

Homeowners and businesses can install solar photovoltaic (pv) equipment, such as solar cells, to generate up to 5MW of electricity for their own use.

DECC figures state that over 40,000 projects have been built since the scheme was introduced.

Installers of small-scale projects under 50kW capacity will not be affected, however rates for electricity generated by projects between 50kW and 150kW capacity will fall by 42% to 19p/kWh.

Rates for medium-scale projects, between 150kW and 250kW capacity, will fall by 51% to 15p/kWh while larger projects, over 250kW capacity, will see rates cut by 72% to 8.5p/kWh.

Minister for Energy and Climate Change, Greg Baker, said that the cuts were necessary to prevent the scheme from becoming "completely overwhelmed" and to protect the roll-out of new green, decentralised energy technologies in homes, communities and small businesses. Large scale solar pv projects were securing much higher rates of return on investment than intended.

"It is clear from all the evidence received as part of the consultation that the demand for the feed-in tariff subsidy has grown so substantially that it now significantly exceeds the amount of funding available. Without urgent intervention, the scheme would have been completely overwhelmed within a very short period of time," he said in a statement.

The High Court granted a group of solar companies permission to proceed with a judicial challenge of the government's decision to go ahead with the cuts to solar tariffs.

The group of 11 companies has since withdrawn its application as the earliest available court slot offered was October 2011 - over two months after the new rates come into force.

The cuts to solar tariffs are now the subject of an early day motion sponsored by Ed Milliband, which currently has 17 signatures.