Subsidies for large-scale solar power installations are to be cut drastically, the government confirmed on Thursday morning, in its long-awaited review of feed-in tariffs (Fit) for renewable energy.
The reform will favour domestic and other small-scale installations of solar power, of up to 50kw – typically enough to cover several houses but not enough for some of the community-scale installations some developers had planned, which would cover fields.
Greg Barker, minister of state for energy and climate change, said: “I want to drive an ambitious roll out of new green energy technologies in homes, communities and small businesses and the Fit scheme has a vital part to play in building a more decentralised energy economy. ”
He said the government had undertaken a wide-ranging review and consultation on the feed-in tariffs, through which installations of solar technology and anaerobic digestion – a process that creates energy from waste, often used on farms – receive a set sum per unit of energy generated.
As of the beginning of August, installations of solar power that are between 50 kilowatts and 150 kilowatts of capacity will receive 19p per kilowatt-hour produced, down from 32.9p. Larger installations of up to 250kw will receive a reduced tariff of 15p per kwh and field-size installations of between 250kw and 5 megwatts of capacity will get half that, at 8.5p per kwh. Both larger sizes were previously paid 30.7p per kwh.
The rates of support for anaerobic digestion go up slightly, and will be 14p per kwh for installations under 250kw of capacity, falling to 13p for installations up to 500kw.
The cost of the feed-in tariffs is met not from government funds but by energy companies adding small amounts to bills for all customers.
However, Barker said the amounts devoted to feed-in tariffs should be changed because if larger scale installations received the same level of support as domestic scale installations, the system would be “overwhelmed”.
He said: “We have carefully considered the evidence that has been presented as part of the consultation and this has reinforced my conviction of the need to make changes as a matter of urgency. Without action the scheme would be overwhelmed. The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities and will also further encourage the uptake of green electricity from anaerobic digestion.”
The changes announced on Thursday confirmed expectations in the renewable power industry, as ministers had indicated in February their desire to restrict funding to large scale installations. The feed-in tariff system – brought in because it has been highly successful in encouraging the uptake of renewable energy in countries such as Germany – began in April 2010.
The new tariffs generated enormous interest among the solar industry – in the first year of the scheme’s operation, more than 30,000 solar panel systems were installed, compared to a few hundred in previous years.
The Department of Energy and Cimate Change said on Thursday that the tariffs were cut because of the potential cost to energy bill-payers. According to government calculations, a field-size system of 5 MW would reap subsidies of £1.3m per year. Twenty such schemes would receive subsidies equivalent to that of about 25,000 households.
But solar industry experts have said the changes will result in less solar power being installed, because large scale schemes – many of which were planned for areas in the southwest – are more efficient than domestic-size systems.
They also criticised ministers for jeopardising investment by bringing in drastic changes to the scheme so soon after it was brought in.
Gaynor Hartnell, chief executive of the Renewable Energy Association, said: “The handling of this whole affair has been poor. Larger-scale PV has been demonised, when it is the most cost-effective approach. Midway through this decade we’re expecting its cost to be on a par with offshore wind.”
A further consultation on feed-in tariffs will be launched this summer, with more changes to the scheme to take effect from next April.