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Feed-in Tariffs (Review)

Volume 525: debated on Friday 18 March 2011

I am today announcing a consultation as part of the fast-track review of feed-in tariffs (FITs) for small scale low-carbon electricity generation.

On 7 February, I announced the start of the first comprehensive review of the FITs scheme for small scale low-carbon electricity generation which would:

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; and

alongside the fast-track review of large scale solar PV, undertake a short study into the take-up of FITs for farm-based anaerobic digestion plants.

The document published today deals with the last two of these points, and seeks views on proposals to changes tariffs for solar photovoltaic (PV) installations larger than 50 kilowatts and farm-scale anaerobic digestion (AD) of up to 500 kilowatts. The proposed new bands and tariffs are as follows:

For large PV installations:

>50kW - ≤150kW: 19p/kWh

>150kW - ≤250kW: 15p/kWh

>250kW - ≤5MW: 8.5p/kWh

And for farm-scale AD installations:

≤250kW: 14p/kWh

>250 - ≤500kW: 13p/kWh

The FITs scheme has been a success since its launch in April 2010 with over 27,000 FITs installations registered to date, of which 92% are domestic-scale solar PV generators, which are not affected by the proposed changes in the fast-track review. The FITs scheme rewards generators for the green electricity they produce, use and sell back to the grid. We want to protect the diversity of the FITs scheme, and ensure that it benefits homes, small businesses and communities, and the full range of innovative technologies.

In these financially challenging times, it is even more important that we get the balance of the scheme right. The projections for take-up of FITs published by the previous Government failed to anticipate any large or small scale non-domestic solar PV installations until 2013. These projections have clearly proved to be flawed. Current market indications are that a rapid increase in the number of larger solar installations entering the scheme could distort funding for smaller and domestic scale installations as well as other technologies. Conversely the current tariff levels have failed to spur a meaningful uptake for anaerobic digestion which means that this technology is not fulfilling its potential contribution to our energy mix.

Decentralised renewables are a vital part of green growth and the FITs scheme has proved highly successful at stimulating growth, driving innovation, creating jobs and cutting carbon. We must act now to ensure that the scheme continues to deliver and we are able to achieve both our spending review commitment to improving the efficiency of the scheme, which will deliver £40 million of savings (around 10%) in 2014-15, as well as ensuring that the benefits of a faster fall in technology costs are shared as widely as possible rather than captured in higher returns for a small number of individual investors.

We are seeking views on proposed tariffs until 6 May 2011. 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. We propose that these changes take effect from 1 August 2011, subject to the outcome of this consultation and parliamentary scrutiny.

We are also seeking views on the scope of the comprehensive review by 12 April 2011.

The consultation document can be accessed at: