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UK Solar Feed-In Tariff (FiT): Ongoing Debate

Posted in Opinion by Kate Archdeacon on March 17th, 2010

Source: Environmental Research Web


Image: borya via flickr CC

FiT for purpose? by Dave Elliott:

The debate on the UK’s new Feed-In Tariff (FiT) has been quite lively, with the Guardian’s George Monbiot arguing that, with solar PV being still very expensive, the way the FiT provided the support needed was economically regressive.

It does look that way at first glance – those that could afford to invest say £10,000 in PV might get £1000 p.a. back for the electricity they generated and used, paid for by all the other consumers, who would be charged extra via their electricity bills. It’s been suggested that this would lead to a £11 p.a. surcharge on bills by 2020.  However, in a rebuttal to Monbiot’s analysis, Jeremy Leggett from Solar Century said “the average household levy in 2013, when tariff rates are all up for review, is likely to be less than £3” and he added “this is far less than the average saving from the government’s various domestic energy efficiency measures over the same period. So there is no net subsidy. The levy is not ‘regressive’ at all”.

The extra cost is certainly small, since the expected size of the FiT scheme is small, only maybe leading to 2% of UK electricity by 2020, so maybe this is not a major issue. But it is good to see that the government has now announced a “green-energy loan” scheme (part of its new “Warm Homes, Green Homes” strategy) under which energy-supply companies and others (e.g. the Co-op) may offer consumers zero or low interest loans for installing new energy systems, to be paid back out of the resultant energy savings. Details have yet to be agreed, but up to £7 bn may be made available over the next decade in this way – although it seems it will start off slowly, from 2012 onwards.

This scheme could help the less well-off to invest in new energy technologies like PV, and join in the FiT. Providing up-front loans via a “pay-and-you-save” system certainly seems likely to be more effective at ensuring wide uptake than just using revenue over time from a FiT. And there would be no extra charges on the taxpayer or the other consumers. So it could be popular.  There does seem to be a lot of support for self-generation. A YouGov survey for Friends of the Earth, the Renewable Energy Association and the Cooperative Group found that 71% of homeowners who were asked said that they would consider installing green-energy systems if they were paid enough cash. So perhaps, one way or another, uptake will be significant.

However, there are still some uncertainties. I argued in an earlier blog, before the UK FiT details emerged, that, while it worked very well for wind in Germany, using a FiT to push PV down its learning curve, to lower prices, might not be the most effective approach for PV.  Now we have the details of the tariff, which has set the price for PV so that those who install it get the same rate of return as those using other cheaper options. This may be fine if you are desperate to get PV accelerated. That’s a matter of judgment. For electricity, in the UK context, large-scale on-land and off-shore wind is clearly a better bet for the moment in terms of price, and also the scale of the resource. But PV prices are falling, and it could well be next in line for expansion, helped by the FiT, plus the loan scheme. Certainly there are benefits: localized generation using micro-power units like PV do avoid long-distance transmission losses, which can amount to up to 10% across the whole UK, and that is important.

However, domestic micro-generation has it limits – it’s arguably the wrong scale. PV is one of the better ones – there are no real technical economies of scale, except via bulk buying and sharing installation costs for larger projects. But micro wind is only relevant in a very few urban UK locations – larger grid-linked machines in windy places are so much more efficient and cost effective. Solar heating (to be supported under the forthcoming Renewable Heat Incentive) maybe be the best domestic option, but even then there are economies of scale (e.g. for grouped-solar schemes sharing a large heat store or even solar-fed district heating). Micro Combined Heat and Power (CHP) similarly: larger-scale mini or macro CHP, linked to district heating networks, are arguably more sensible.

Fortunately the 5 MW UK FiT ceiling, though low, gives us a chance to operate at slightly larger community scale, which may redeem the whole thing. See the excellent Energy Saving Trust report Power in Numbers, which states that “the economics of all distributed energy technologies improve with increasing scale, leading to lower cost energy and lower cost carbon savings and justifying efforts for community energy projects”. And for some smaller-scale renewables, it adds that “it is only when action occurs at scales above 50 households, and ideally at or above the 500 household level, that significant carbon savings become available”.

FiT for purpose? by Dave Elliott

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