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News - FIT

FIT Comprehensive Review Phase 1 - 26th January 2012

As you are no doubt aware the FIT tariff court case has been on going now for a number of weeks without producing any result either way.  Yesterday the Court of Appeal unanimously rejected Government attempts to overturn last month's High Court ruling that its plans to rush through sudden cuts to solar tariff payments are illegal.  However, while the Appeal was rejected the Government have asked permission to Appeal to the Supreme Court.

What does this mean for tariff rates?

This does not affect the Government's proposal to cut rates to 21.0p for systems installed after the 3rd March 2012, because the reduction has followed the correct procedure with regulations being tabled in Parliament already, and the cut coming after the 40 day period required by law.

There is still some uncertainty about rates paid on installations fitted between 12th December 2011 and 3rd March 2012 because it is not yet clear whether the Government will be allowed to appeal.  However, the minimum tariff that people installing in this period will get is 21.0p, and if the Government's Appeal is unsuccessful or should they decide to withdraw it, then they would get the 43.3p rate (for sub a 4kW system).

The message for new customers is simple.  Install by the 3rd March 2012, and the rate you receive is guaranteed to be no lower than 21.0p per kWh*.  When you consider that panel prices are coming down, this gives a substantial return of up to 10%.  There's also a chance that your rate may be raised to 43.3p per kWh * depending on the outcome of the appeal by the Department of Energy & Climate Change (DECC). 

 *Please note that these figures are based on a <4kW (retrofit installation) please see below for a table of all new proposed tariffs.

John N Dunn Group can still generate you a Return on Investment of around 10% and upwards

Under the proposed new tariffs, a well sited 2.6kW domestic PV installation costing around £6,500 could result in FIT payments (generation plus export tariff) of around £500p.a, and a total FITs revenue of £730p.a (nominal undiscounted) once bill savings are taken into account.

This combined with an estimated bill saving of around £270p.a. will result in a return on investment of around (ROI) 11.4%.  In a world of low interest rates, this remains a competitive investment opportunity for households.

Commercial installations are still and attractive investment.  A 10kW system will cost around £23,500 and could result in FIT payments of around £1,100p.a combined with a bill saving of £1,030 this will still result in a return of around 10.6%.

A 25kW system will also still result in a ROI of around 10.6%.

Proposed new tariffs for solar PV

Band kW                                  Current Tariff (p/kW)

Proposed standard Generation Tariff   (p/kW)

Proposed Multi Installation rate (p/kW)

4kW (New build) 37.8  21.0   16.8
4kW (retrofit)  43.3  21.0  16.8
 4-10kW  37.8  16.8  13.4
 10-50kW  32.9  15.2  12.2
 50-100kW  19.0  12.9  10.3
 100-150kW  19.0  12.9  10.3
 150-250kW  15.0  12.9  10.3
 250kW-5MW  8.5  8.5*  8.5*
 Stand Alone  8.5  8.5*  8.5*

We urge those looking to install solar PV to act now to get the best rates for 25 years.  There are incentives to act sooner rather than later, the returns could substantially drop from April this year.

Please see examples of work we have done to date on our case studies page.

Details of the Comprehensive Review

To control spending, the government state they have no option but to propose revising the tariffs for most solar PV to bring the expected rate of return back to around 5%.  The government is proposing to:

Phase 1

  • To reduce solar PV tariffs from 1st April 2012, with the lower tariffs applying to all new solar PV installations with an eligibility date on or after 12th December 2011.  For domestic PV, this would mean a reduced tariff from 43.3p to 21.0p with similar cuts for larger installations.
  • Strengthening the link between FITs and energy efficiency from April 2012, with properties that do not meet the minimum energy efficiency levels receiving FITs at a lower rate (9p per kW).
  • Introducing a new multi installation tariff rate from April 2012 to reflect the lower costs for aggregated schemes e.g. rent-a-roof.

Phase 2

  • A proposed tariff for other FIT technologies.
  • A set of reform proposals for the scheme.  This will likely get into the issue of 'degression' (the method by which the FIT steps down over time for new installations).
  • It is likely to introduce some form of proposed 'capacity cap' trigger almost certainly during the next FIT year.

The Government has proposals that will restrict solar PV costs to £250m-£280m (nominal undiscounted) on their annual energy bills in 2010 compared to not taking action.

What Next?

The Government has formally asked permission from the Appeal Court to take this matter to the Supreme Court.  This however does not necessarily mean Ministers have decided it will do so - at the moment they may simply be keeping the option open.  The Appeal Court judges will make a decision on whether to grant permission in the next few days - if it is granted, the case can go to the Supreme Court.  If permission is refused the Government would still have the fall back option of applying to the Supreme Court itself for permission to appeal.  But this would add a further step in the process - and at each step the chances of success for Ministers recede a little further.

Our Message

Install now and the minimum tariff for installations between 12th December 2011 to 3rd March 2012 will be 21.0p.  If the Government loses the appeal in the Supreme Court, then these installations will get the higher rate of 43.3p until 3rd March 2012.  You can still make a good return on investment of around 10% (based on <4kW retrofit installation).

Please note that all calculations are based on a 30 degree south facing roof, with no shading using SAP 2009 figures.  The figures are based on the new 31st October 2011 FIT review.  Those looking for a quote will require a technical survey to ascertain the exact costs.

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