The UK government’s plan to abandon the feed-in tariff (FIT) system for small renewable energy projects did not go down well, especially since it meant the loss of the export tariff. Householders who invested in a photovoltaic (PV) array on their roof have used that to offset the cost of their investment by selling any extra power they generated at a reasonable rate – 5.24 p/kWh – to their grid supplier. However, with the FiT, along with the export tariff, to be closed to new applicants from the end of March, they will get nothing for any exports.
In a parliamentary debate on the FiT in November last year, energy minister Claire Perry said she aimed to avoid that situation. It certainly looked unfair and counterproductive.
Alan Whitehead, Labour energy shadow, said “I cannot think of a better way to discourage people who might be thinking of investing in solar than telling them that they will be expected to give away to the national grid half the electricity they generate from their investment”. Perry said she “completely agreed” that “solar power should not be provided to the grid for free, and that is why I will shortly be announcing the next steps for small-scale renewables”.
Supporting renewables: FiTs not tenders?
But Perry reiterated the rationale for abolition of the FiT. It “has been a huge success, supporting over 800,000 installations”, but “as the market matures and installation is now possible without Government subsidy, we believe that it is the right time to close the feed-in tariff scheme”. She noted that the FiT “has cost consumers over £4.5bn to date and is scheduled to cost more than £2bn a year for at least the next decade”.
However, Whitehead pointed out that, “when we talk about the export tariff, we are not talking about a subsidy; we are talking about a payment for goods supplied. The minister has elided the feed-in tariff and the export tariff. Can she just accept that she has messed things up on this occasion, call off talk of removing the export tariff and get on with using that tariff to support future subsidy-free solar investment?”
There did seem to be some general policy confusions. Perry talked of news that a “string of private sector subsidy-free solar funds is set to open this year, particularly with business premises now taking advantage of the benefits that solar can provide in balancing their own systems. We are going through that transition with the expectation that we will see more solar deployed next year than we have previously”.
However, the schemes Perry alluded to are mostly going to be large projects, for example, ground-mounted projects like the 2.5 MW scheme in Wiltshire, developed by Public Power Solutions, a subsidiary of Swindon Borough Council, with a direct private wire connection to Swindon’s Household Waste Recycling Centre. Large ground-mounted projects like that can be commercially competitive, with the Solar Trade Association suggesting that some projects could get down to £50–60/MWh. By contrast, smaller domestic roof-top projects are unlikely to do so well, especially without the export tariff.
Perry also rather undercut the case for supporting small-scale solar FiTs by noting that there had been “a boom in some of the cheapest forms of renewable energy, including offshore wind” so that “we are now able to generate over 30% of our energy supply from renewables, which is much cheaper than putting it on individual rooftops”. That is a little convoluted and confusing, since the cheapest options — onshore wind and large solar farms — have been blocked from contract for difference (CfD) support by the government, which has also imposed tight planning restrictions on them.
That’s the way with markets, with there being no certainty that the prices that emerged would ensure a balanced development pattern.
Dave Elliott
Be that as it may, Claire Perry has now gone ahead with a consultation on the Government’s proposals for a new market for electricity export from small-scale PV solar, configured “so that people are not providing it to the grid for free”. Under the proposed “Smart Export Guarantee” (SEG), electricity suppliers would pay new small-scale PV and other energy producers for excess electricity from homes and businesses put back into the power grid.
Perry was very enthusiastic. “This new scheme could help us to build a bridge to the smart energy system of the future, with consumers firmly at its heart — not only buying electricity but being guaranteed payments for excess electricity they can supply to the grid,” she said. “It could also reduce strain on energy networks with a more decentralized and smarter local network delivering resilience much more cost-effectively, unlocking innovative products for electric vehicles and home energy storage; a win-win for consumers and the environment and a key part of our modern Industrial Strategy.”
The Business Energy and Industrial Strategy Department likewise said that “the new scheme could create a whole new market, encouraging suppliers to competitively bid for this electricity, giving exporters the best market price while providing the local grid with more clean, green energy, unlocking greater choice and control for solar households over buying and selling their electricity”. It added “the SEG would mean households and businesses installing new renewable energy generators would be paid transparently for the energy they produce — protecting consumers from cost burdens, by using established smart technology”.
While some welcomed the move to provide something to replace the export tariff, there is a way to go still. It is just at the consultation stage. The details of the new scheme will take time to consolidate, as will implementation — one aim being that it would be integrated in with the smart meter system. So there were complaints that there would be a long period during which new PV prosumers would be getting nothing for any excess power they produced. It might take a year to sort out. Or longer, judging by the delays with the smart meter roll-out. Community projects would find that especially hard.
Labour shadow business secretary Rebecca Long Bailey also said: “Rather than a simple flat payment for energy exported to the grid, the government is proposing a hugely complex market mechanism in which large energy companies – notorious for overcharging consumers billions of pounds – can offer whatever sum they deem fit to households.” That’s the way with markets, with there being no certainty that the prices that emerged would ensure a balanced development pattern.
This episode is just the latest in a long-running saga of arguably less than ideal government policy interventions in the renewable energy field. If you want a comprehensive critical account, my new book Renewable Energy in the UK: Past, Present and Future takes you through the story in some detail. For example, on this specific FiT issue it’s interesting that in 2014 DECC’s view was that PV solar would be able to go forward “without financial support at some point in the mid-to-late 2020s”. The new policy imposes the support cut-off somewhat earlier, which some see as premature.
