DECC proposes deep cuts to Feed in Tariff support

DECC have announced a consultation to review the Feed in Tariff (FiT) scheme, by which the government provides financial support for renewable technologies – most notably solar panels.

Currently the government pays the owner of the system for each kilowatt hour of electricity it generates; the owner also benefits from a tariff for each kilowatt hour they export, not to mention reduced energy bills. The subsidy varies dependant on the size of the installation.

According to DECC, the uptake of solar energy has been so great that funds set aside for this scheme will be exceeded sooner than expected, hence a consultation has been launched to revise this financial incentives downwards.

To date the feed in tariff has dramatically reduced the payback time of a solar array; consequently it has significantly stimulated uptake in the market, reducing the cost of the panels themselves. The consultation threatens heavy cuts in January 2016 and the possibly of wholesale tariff removal swiftly thereafter. Given the rates proposed from January 2016, the payback for a typical system will rise from 6 years to more than 10 years.

In addition, the export tariff (the price paid for unused electricity currently exported to the National Grid) is also under scrutiny, potentially increasing payback times further.

Solar energy remains a sensible proposition for businesses irrespective of policy and subsidies, as it provides clean, free electricity not subject to typical energy market fluctuations. But it is clear that to reap the best financial return businesses need to act quickly to secure support under the current arrangements and rates.

 

 

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