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UK confirms subsidy cut for small-scale renewables despite heavy opposition

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UK confirms subsidy cut for small-scale renewables despite heavy opposition

SNL Image

Workers install a solar panel in California. The U.K. will close its subsidy scheme for small-scale renewables in 2019.
Source: Associated Press

Homeowners and businesses looking to install rooftop solar panels in the U.K. will no longer be able to apply for subsidy support beginning in April 2019 after the government closes its feed-in tariff scheme for most small-scale renewables to new applicants. The move comes despite overwhelming opposition and the government's own estimates that it could reduce the annual deployment of small-scale solar photovoltaic and wind plants by more than 80% by 2021.

While unsurprising, the closure "creates a real hiatus in the market," said Frank Gordon, Head of Policy at the Renewable Energy Association, highlighting that the government needed to quickly establish a successor scheme if it wants "to avoid significantly stalling the much-needed deployment of decentralized renewables".

"[This] will have a knock-on effect on jobs and continued investment," Gordon said.

The U.K.'s Department for Business, Energy and Industrial Strategy, or BEIS, said on Dec. 18 that it will simultaneously close both the generation and export tariff for renewables up to a capacity of 5 MW, including solar photovoltaic, wind and hydropower, to new entrants at the end of March. It has separately asked for industry feedback on the future support for small-scale low-carbon generation and said it will publish specific proposals "in due course".

In response to its public consultation on the feed-in tariff closure, the department said it received feedback from 345 trade associations, manufacturers, energy suppliers and project developers, as well as community groups and local authorities. Of those, 91% opposed the plans.

In a worst-case scenario, the removal of the payments could mean that only 39 MW of small-scale solar photovoltaic and 6 MW of wind capacity is added next year, the government estimated in a separately released impact assessment. If subsidies were kept open, additions are forecast to total 237 MW for solar and 73 MW for wind, it said. Over the next two years, that gulf would continue to widen.

Market-based mechanisms

Although it granted that the scheme has been key in driving small-scale renewables uptake, BEIS said in its decision that keeping any part of it open past next year would "not align with the wider government objectives to move towards market-based solutions, cost-reflective pricing and the continued drive to minimize support costs on consumers." Claire Perry, the Minister of State for Energy and Clean Growth has said that the feed-in tariff scheme will continue to cost over £2 billion a year for at least the next decade.

Feed-in tariff scheme participants are currently paid quarterly by their energy supplier, both for the electricity they generate and export to the grid, with the costs ultimately recovered from consumers. The government had announced its intention to close the generation tariff years ago, but only proposed a simultaneous phaseout of the export tariff in July, raising an outcry from industry groups.

They pushed the government to continue at least the flat-rate export payments and gained hope when Perry told parliament in November that "solar power should not be provided to the grid for free." In the end, the government yielded only slightly by including some time-limited extensions and a one-year grace period.

"BEIS has taken this decision even before it sets out how it will overcome a really fundamental market failure that risks seeing new solar homes put power on the grid for free from next April," said Chris Hewett, CEO of the Solar Trade Association. "At a bare minimum, [the] government should retain the export tariff until an effective, alternative way to fairly remunerate solar power is implemented."

Since its start in 2010, the feed-in tariff scheme has supported more than 4,800 MW of solar photovoltaic, 723 MW of wind, 220 MW of hydro and 288 MW of anaerobic digestion projects, according to data published by energy regulator Ofgem. Installations are split almost equally between domestic and commercial uses, with a small share of community and industrial projects.

The total installed capacity of both onshore wind and solar photovoltaic in the U.K. reached just over 13,000 MW each halfway through this year, including grid-scale projects, while small hydro capacity was close to 400 MW, according to the government.