I am today announcing the start of the first review of the feed-in tariffs (FITs) scheme for small-scale low-carbon electricity generation.
Decentralised renewables are vital to green growth and the FITs scheme has proved highly successful at stimulating growth, driving innovation, creating jobs and cutting carbon.
Since the scheme began last year more than 21,000 installations have registered to date. The vast majority of these are domestic installations, including solar panels, wind turbines and micro-hydro installations. The scheme is working well. The take-up of solar photovoltaic (PV) panels under FITs has been a success with 20,000 installations now registered. However there is room for improvement. I am concerned about the impact of super-size solar installations. I am also disappointed at the lack of farm-based anaerobic digestion plants currently accessing FITs.
In light of the economic and fiscal situation, inherited by the coalition, it is imperative that we take a more responsible and efficient approach to public subsidy, including where this subsidy is funded through energy bills. Specifically, the spending review committed to improving the efficiency of FITs and finding £40 million of savings, around 10%, in 2014-15.
Since the spending review, I have become increasingly concerned about the prospect of large-scale solar PV projects under FITs, which was not fully anticipated in the original scheme and could, if left unchecked, take a disproportionate amount of available funding or even break the cap on total funding. Several large solar installations have already received planning permission. Industry projections indicate there could be many more in the planning system. In light of this uncertainty, and the risk that such schemes could push FITs uptake off trajectory and may make the spending review savings difficult, I have decided to end the potential for damaging speculation and bring forward the review of the scheme to look at ways of correcting these early teething problems.
I recognise that industry needs a long-term plan for investment in which it can have full confidence. Today I am announcing a comprehensive evidence-based review of the FITS scheme and, to provide further certainty to the renewables industry, I can confirm that we also hope to publish next month measures to support renewable heat within the envelope agreed at spending review.
The FITs review will:
Assess all aspects of the scheme including tariff levels, administration and eligibility of technologies;
Be completed by the end of the year, with tariffs remaining unchanged until April 2012 (unless the review reveals a need for greater urgency);
Fast-track consideration of large-scale solar projects (over 50kW) with a view to making any resulting changes to tariffs as soon as practical, subject to consultation and parliamentary scrutiny as required by the Energy Act 2008.
Alongside the fast-track review of large-scale solar PV, we will also undertake a short study into the take-up of FITs for farm-based anaerobic digestion plants. Only two such projects have been accredited so far and by this point at least six were expected. We are looking again at the tariff rates inherited from the previous Administration to see if they are enough to make farm-based anaerobic digestion worthwhile.
Broad terms of reference for the review are available from www.decc.gov.uk/FITS and we are seeking views on specific issues to be considered. The Government will not act retrospectively and any changes to generation tariffs implemented as a result of the review will only affect new entrants into the FITs scheme. Installations which are already accredited for FITs at the time will not be affected.