Reforming the Feed-in Tariffs (FITs) scheme - Ministerial statement by Edward Davey

13th February 2012

The Department of Energy and Climate Change have released a Written Ministerial Statement by Ed Davey, Secretary of State for Energy and Climate Change, on the Feed-in Tariffs scheme.

Ministerial Statement

This Government is committed to promoting decentralised energy and the take-up of small-scale low-carbon technologies by the public and by communities.

The Feed-in Tariffs (FITs) scheme is an important instrument in meeting that commitment, but it needs to be reformed as we want as many people as possible to be able to benefit from the scheme. For too long it has been limited to the lucky few.

So today I am publishing a series of documents which mark a crucial turning point for the FITs scheme. Taken as a whole, this reform package will put the scheme on a predictable, certain and sustainable footing for consumers, and for the businesses delivering these exciting renewable technologies.

It is no secret that the uncontrolled surge of solar photovoltaic (PV) installations in the latter part of last year, driven by rapidly falling costs, placed a huge strain on the FITs budget, threatening the Government’s ability to roll out those small scale low carbon technologies in the numbers we wanted over the next few years. We acted as swiftly as possible to respond to the threat this posed both to the future of the FITs scheme and to the bills of hard pressed consumers, through the changes we are now making to the tariffs for solar PV.

But that is by no means the end of the story on FITs. We are now taking the opportunity of the review to put right the many limitations of the scheme we inherited. We have looked hard at the FITs budget and made the most of the flexibility available under the Levy Control Framework to ensure that we can keep the scheme going. The reforms I am announcing today are designed to make that budget go as far as possible to maximise the number of people able to benefit from FITs; to provide greater certainty to the industries concerned; and to ensure value for money to consumers who pay the bills.

FITs reform package

The documents we are publishing today are as follows:-

(i) Government response to the consultation on FITs for solar PV. This supplements our announcement of 19 January 2012 which confirmed the new tariffs for solar PV that will continue to provide a competitive return on investment for householders, communities and others. The new tariffs are designed to apply to all installations with an eligibility date from 3 March onwards.

We are now also announcing the details of the new energy efficiency requirement, and of the new multi-installation tariff rates. We have listened carefully to concerns raised in last autumn’s consultation and have decided that the energy efficiency requirement should be based on an Energy Performance Certificate (EPC) rating of level D or above, not level C or any other option as previously mooted. We have also decided that the threshold at which the multi-installation tariff rates would apply should be increased from more than one PV installations to more than twenty five. This will help community groups, small businesses and councils who do not benefit from the economies of scale that larger aggregators can obtain.

We are also today laying before Parliament draft licence modifications which, subject to the Parliamentary process set out in the Energy Act 2008, make provision for these new requirements to come into effect for new PV installations with an eligibility date on or after 1 April 2012.

(ii) A consultation on solar PV cost controls. In line with the encouraging evidence we have seen of the reduction in costs associated with solar PV, this document sets out proposals for an ambitious programme of six monthly degression for solar PV tariffs, with an added deployment trigger to ensure that subsidy levels keep in step with the market. This builds on the best of the German system and will remove the need for emergency reviews, consistent with our commitment to a stable, predictable future for solar PV and for the whole FITs scheme. It will also help to keep the long-term costs of supporting solar PV down, increasing the number of people able to benefit from FITs over time. The consultation closes on 3 April.

(iii) A consultation on tariffs for FIT technologies other than PV, and other scheme administration issues. This includes proposals to carve out special arrangements for community projects, including greater tariff stability. It also proposes an increase in the rate of return available for micro-combined heat and power, in recognition of the benefits this technology could bring, and potential tariff guarantees for wind, anaerobic digestion and hydro projects, so that those technologies can have greater certainty about what rates of return they will receive. The consultation closes on 26 April.

All these documents, together with the supporting Impact Assessments, are available from the Department’s website.