After weeks of anticipation the Department of Energy and Climate Change (DECC) has published the results of the latest solar feed-in tariff consultation. As of August 1st, the new rate for 4kW systems will be 16p/kWh, set in line with current installation figures.
Speaking in the House of Commons, the Minister of State, Greg Barker, announced a range of alterations to the existing feed-in tariff (FiT) scheme. The UK Solar Industry will now benefit from a less complex degression management model, which includes smaller quarterly degressions linked to market deployment. This differs from the existing system, which offers an automatic degression.
As expected the new tariffs (please see below) will go ahead from August 1st, one month later than originally planned. After noting lower-than-expected installation rates the Department decided to hold off on cutting the tariff until the market begins to pick up.
The tariff for a domestic solar installation will now be 16p/kWh, down from 21p, and will be set to decrease on a three-month basis by 3.5% thereafter. These degressions are expected to be delayed if the market slows down. Uptake will be viewed in three different bands (domestic (size 0-10kW), small commercial (10-50kW) and large commercial (above 50kW and standalone installations). Quarterly reductions will be determined within those bands.
The new tariffs, which will now be paid over 20 years instead of 25 years, should give a return on investment (ROIs) of over 6 percent for most typical, well-sited installations, and up to 8 percent for the larger bands.
Investor income will also be boosted by the increase in the export tariff, which will increase to 4.5p from 3.1p. This will be particularly beneficial for large-scale solar investors, who will be able to add the export tariff to the feed-in tariff in order to generate a reasonable return on investment. All tariffs will continue to be index-linked in line with the Retail Price Index (RPI).
The DECC also revealed that organisations with more than 25 solar PV installations will get 90% of the standard applicable tariff, increased from the 80% proposed in February. This increase reflects new evidence heard on costs involved for these projects.
