Solar PV and the Feed In Tariff cut

Solar PV and the Feed in Tariff cut.

The Government intends that, from April 2012, the Feed In Tariff paid to owners of Solar PV installations will be cut from 43p per unit to only 21p in a review carried out by the Department of Energy and Climate Change. As a result, owners of installations which were not completed by 12th December cannot qualify for the 25 year contract at the higher rate and their contract will adjust to 21p from the Spring onwards. It is also intended that Feed In Tariff’s are reduced for larger commercial installations above 4kw.

Friends of the Earth and other interested parties took out a successful High Court action against the Government and consequently, the method in which the revised tariffs had been implemented has been declared illegal. The result is that installations carried out between the 12th December and the date that the Government manage to implement the changes legally will still qualify for the higher rate payments. 

However, this position has again been compromised by the Government who, on the 4th January, asked the Court of Appeal to hear an appeal against the High Court decision. Despite the original judge advising against this as it would stand little chance of success, the appeal has been submitted and it now leaves the industry in a state of uncertainty as installations completed in this interim period will benefit from the 21p Feed In Tariff rate but could benefit from the 43p rate subject to the outcome of the appeal.

Obviously, concern within the industry has been high and the proposed cuts led to a rush of projects all completed just before the December deadline. Gavin Fearnley of Gough & Kelly’s Renewable Energy Division does not think that the cut marks the end for solar; “The industry has to accept that the Feed In Tariff was over generous and whilst the reduction may be steeper than we would have wanted, Solar PV still represents an excellent return on your investment”. Indeed, with the Government losing their Court case and panel manufacturers cutting material costs to account for the lower rates, optimistic investors could really reap the benefits; “Those installing now will still have a secure contract providing a desirable return on their investment but they could also see the best benefits ever from the Feed in Tariff if, as expected, the Government loose their Court appeal”.

In fact, regardless of the appeal outcome, with manufacturers re-assessing their product pricing there is a bright future for the industry; “Where else can you receive a minimum 8% to 9% return, index linked to inflation on a very safe 25 year contract? In addition an investor will see a genuine reduction in their Carbon Footprint equating to around 1.5 tonnes of CO2 every year for a typical home!” 

Gavin does have one word of caution, “Unfortunately, one of the Government’s review proposals is to insist that houses qualifying for the full Feed In Tariff after April can only do so if they achieve a grade C rating on an EPC certificate”. The implications of this could be quite serious for some home owners who may be required to fit double glazing, loft insulation or new boilers before being in a position to qualify for the Feed In Tariff. For such properties it is important to have installations completed before April 2012.

Ultimately (and despite causing short term problems) the cut to the Feed in Tariff will help to stabilise a rapidly developing industry and see the back of the numerous unscrupulous companies which have sprung up to cash in on a situation that arguably was too good to be true. This will leave reputable certified and accredited companies like Gough & Kelly who, having been in business for over 25 years, are proud to provide an excellent service to existing and new customers; “Renewable energy is a necessity, not a luxury, and with energy prices rising at the rates we have seen recently, the desire to generate your own power will become more and more important to your own finances and to the environmental impact of our lifestyles”.

For more information about how Gough & Kelly can help with your renewable energy requirements please contact us on 0844 880 7100.