DECC has now published its much-anticipated responses to its consultations regarding proposed changes to the Feed-in Tariff (FIT) and also to ongoing Renewables Obligation (RO) support for solar PV projects of 5MW and below.
Renewables Obligation changes for sub-5MW solar PV
There are no major surprises, with DECC generally holding firm to the proposals made as part of its 22 July 2015 consultation, although there is some unexpected positive news for certain grace period projects (more below).
DECC's decisions are intended to be implemented through secondary legislation, which will result in:
- closure of the RO across Great Britain to new solar PV generating stations at 5MW and below from 1 April 2016, and to additional capacity added to existing accredited stations that does not take it above 5MW in total installed capacity from that date.
- the availability of grace periods in line with those provided for solar PV projects above 5MW last year, enabling projects to be accredited up to 31 March 2017 where preliminary accreditation or significant financial commitments have been made on or before 22 July 2015, and for projects affected by grid delay.
- clarification of the planning evidence required as part of the significant financial commitment test, to exclude incomplete or invalid applications (to address those applications hastily submitted on 22 July 2015 on the day that the consultation was published).
- no special treatment for civic or community projects.
- a removal of grandfathering for solar PV projects in England and Wales at 5MW and below with an accreditation date from 23 July 2015 onwards, with an exception for those which meet the significant financial commitment grace period test.
A technology-specific banding review has also been announced for solar PV generating stations at 5MW or below, in England and Wales only. The changes currently proposed by DECC (which are subject to consultation until 27 January 2016) would result in:
For projects not benefitting from grandfathering (through the significant financial commitment criteria):
- an initial ROC banding of 1.3 ROCs (or 1.5 ROCs for building-mounted PV) for projects accredited on or before 31 March 2016;
- an initial ROC banding of 1.2 ROCs (or 1.4 ROCs for building-mounted PV) for projects accredited between 1 April 2016 and 31 March 2017;
- an initial ROC banding of 0.8 ROCs for all projects accredited between 1 June 2016 and 31 March 2017;
- notwithstanding that a project may have been originally accredited at a higher initial ROC banding level, a reduction in support levels to 1.2 ROCs (or 1.4 ROCs for building-mounted PV) during the period from 1 April 2016 to 31 May 2016, with a further reduction in support to 0.8 ROCs from 1 June 2016; and
- no protection from future banding reductions.
For projects benefitting from grandfathering (through the significant financial commitment criteria):
- a ROC banding of 1.3 ROCs (or 1.5 ROCs for building-mounted PV) protected for 20 years for projects accredited on or before 31 March 2016;
- a ROC banding of 1.2 ROCs (or 1.4 ROCs for building-mounted PV) protected for 20 years for projects accredited between 1 April 2016 and 31 March 2017.
There is therefore an unexpected concession by DECC - if a project does qualify for grandfathering (i.e. by meeting the significant financial investment grace period), that project would not be affected by the proposed banding reduction to 0.8 ROCs.
The effect of the proposed changes for projects with different characteristics is neatly illustrated within the tables published by DECC at Annex B of its consultation response.
Feed-in Tariff Changes
The Government has published its response to the FIT consultation.
The outcome is generally more positive for the industry than the measures originally proposed by DECC, with the headlines being as follows:
- The FIT scheme will remain open with a budget cap for new installations of £100 million per annum up to April 2019, with quarterly deployment caps for all technologies to control spending.
- There have been improvements to some tariffs compared with those previously consulted upon. Tariffs have not yet been set for AD and micro-CHP and these will be consulted on in early 2016.
- There will be default tariff degression levels set (with more severe contingent degression if quarterly caps are met).
- The FIT scheme will be ‘paused’ from 15 January to 8 February 2016 in order for the changes to be implemented, during which only those projects with pre-accreditation granted before 1 October 2015 will be able to accredit.
- Projects that commission and apply for the FIT during the pause will be placed in the queue for when the new tariffs and caps come into effect in February 2016.
- Applicants who miss out on a cap, will have their applications for FITs accreditation frozen, together with a place in the queue when the next cap opens.
- Pre-accreditation will be re-introduced for solar and wind projects over 50kW and for all anaerobic digestion and hydro projects (i.e. all technologies and scales that were previously eligible). The eligibility periods have been changed for AD and hydro to 2 years.
- Extensions to existing schemes will no longer be eligible under the FIT from 15 January 2016.
- Sustainability criteria for AD will not be imposed immediately, but this option will be investigated further in the future.