Government clarifies future feed-in tariff and Renewable Heat Incentive arrangements

Automatic annual reductions in the feed-in tariffs (FiTs) for wind, hydro and anaerobic digestion (AD) technologies will by introduced from April 2014, Energy Minister Greg Barker said. New tariffs will be published two months before each cut takes effect and will be based on publicly-available data, he said.

The introduction of a 'degression mechanism' is contained in the Government's response (56-page / 950kb pdf) to its consultation on the future of FiTs for non-solar technologies, in addition to new rates which will take effect from 1 December. Changes to solar tariffs, which were announced in May, will take effect from 1 August. Solar FiTS will be reviewed every three months in an attempt to minimise the risk of budgetary constraints. 

The Government is also proposing the introduction of a flexible degression-based system to control the cost of its Renewable Heat Incentive (RHI), which provides long-term incentives to those who use qualifying technologies to generate heat. The proposal, which is open for consultation until 14 September, will reduce tariffs available to new applicants automatically at pre-determined trigger points. It will replace the temporary cost control mechanism announced in March, which is due to take effect shortly.

FiTs provide long-term financial incentives to businesses and individuals that generate electricity from renewable sources, and vary according to the technology used. Once accredited under the scheme, installers are eligible for payments for the life of the generation equipment subject to a maximum period.

Unexpectedly high uptake combined with the falling cost of the technology forced the Government to conduct an emergency review of the FiTs scheme for small-scale solar photovoltaic (PV) installations last year. However, it was forced to abandon plans for cuts of more than 50% for new installations completed after December 2011 due to insufficient consultation.

Barker said that the new arrangements would enable the Government to provide "long term certainty" for investors in small scale renewable electricity generation projects.

"As well as reducing tariffs over time for AD, hydro and small scale wind in line with uptake, we are introducing tariff guarantees for all technologies, great news for projects with long lead in times like hydro power," he said. "We are also planning to remove the energy efficiency requirement for community and school solar projects in recognition of the hard to treat nature of community buildings often involved in such schemes, and the educational benefits that they can bring."

Community installations of any size would also, he said, be entitled to obtain a guaranteed tariff in advance. From April this year, only properties with an Energy Performance Certificate (EPC) rating of 'D' or above have been able to claim the full payment due under the scheme.

Among the changes outlined in the Government's response is the introduction of a preliminary accreditation scheme for AD and hydro projects, as well as wind and solar PV installations with an energy generation capacity of over 50kW. This will allow the sponsors of more expensive projects to know before construction that they will be accredited under the scheme, it said, and will also guarantee a tariff for the project provided it is completed within an agreed timescale.

Paul Thompson at the Renewable Energy Association (REA) said that the new arrangements showed that the Government had "listened carefully" to concerns from the industry following

"We particularly welcome the support for community schemes and the improvements to the cost control mechanism," Thompson added. "The introduction of tariff guarantees for projects at a relatively early stage is also very helpful, and we look forward to a similar approach being extended to the Renewable Heat Incentive."Last month the Government confirmed a temporary power allowing it to suspend payments under the 
RHI with one week's notice if the scheme appears likely to go over budget. It is now consulting on a longer-term cost control mechanism.

Under the proposed system tariffs will be reduced for new applicants as uptake of the RHI approaches pre-determined 'trigger points' based on publicly available data. A test to see whether a rate cut is necessary will take place quarterly, and one month's notice will be provided of any cuts.

A further consultation on ways to extend the support available under the RHI to domestic generators will be published in September, the Government said, and will include proposals on how to manage the budget for the domestic scheme. It is currently anticipated that the domestic RHI will launch in summer 2013. The Government also intends to consult on increasing the number of eligible technologies under the RHI in September.

The RHI provides long-term financial incentives and support to successful applicants that use eligible and qualifying renewable technologies – such as heat pumps, biomass boilers and solar thermal panels – to generate heat. The first phase, which was introduced for non-domestic users in November 2011, will make payments on a quarterly basis over a 20-year period.