HC 1605 Energy and Climate Change and Environmental Audit CommitteesWritten evidence submitted by Leeds Solar
(a) Impact to date of Solar PV Feed-in Tariffs and the state of the solar energy market
The Feed In Tariff combined with measures such as the permitted development regulations, and allowing MCS accreditation through CPS schemes such as NAPIT has directly led to a step change in the solar PV industry from it being an insignificant and expensive cottage industry to it being an industry capable of installing GWp scales of electricity generation capacity at rapidly deceasing costs.
The economies of scale, and impact of competition introduced thanks to the feed in tariff have successfully reduced the standard costs of a 4kWp PV domestic PV system from approximately £16,000 before the scheme started to around £10–12,000 now. We anticipate this price dropping further to around £9,000 in January following the FIT rate cut.
(b) The balance between affordability and delivering the objectives of the Solar PV Feed-in Tariffs, including factors to consider when setting the rate of small-scale Feed-in Tariffs including jobs created, emissions reductions and energy-saving behavioural change
The FIT degressions are far too widely spaced and not deep enough. There should be regular degressions every four to six months to both drive down costs and prevent excessive profits being made in the months before any annual degression period.
More regular degressions would also benefit the industry as customers would not be waiting until the period before the drop to try to get the best balance of price and financial payback, which has been a major problem for us.
If we had a 10–15% reduction in the FIT rate every six months solar PV would be capable of delivering electricity at a similar rate of return to onshore wind by 2014–15. We’re confident that we can live with and grow with such cuts if they’re scheduled well in advance.
(c) The way in which the Government has managed the Solar PV Feed-in Tariff, the impact this has had to date, including the management of the Consultation
DECC’s management of the feed in tariff scheme has been appalling. It was obvious at the time of the comprehensive spending review last year that costs and prices were dropping far more rapidly than DECC had originally envisioned, and yet despite cutting £40 million from the planned budget, DECC decided to leave the tariffs unchanged.
Similarly in April 2011 despite a 20–25% reduction in installed costs, DECC carried on with the planned rise in FIT rates of 4.8% in line with RPI inflation, thereby meaning that the rates of returns became far higher than they should have been.
During the fast track review of the rates for over 50KWp installations, we along with many others in the industry made representations to DECC requesting that they changed their plans to introduce an urgent across the board cut of 20–30% in line with the reductions in installed prices we were seeing, and to prevent the entire FIT budget being used up. DECC ignored these representations entirely, and left the under 50KWp rates unchanged while slashing the rates for the over 50kWp systems.
The result of this was that not only did the domestic market continue to grow exponentially as the returns rose above 15%, but on top of this, most of the money that had been raised originally to finance largescale systems was instead moved into the rent your roof sector, resulting in a huge upsurge in the rent your roof markets rate of installations.
To compound this, DECC seem to have been taken completely by surprise when the September installation figures were announced, resulting in this current panicked slashing of the FIT rates. Anyone with half a clue in the industry knew that the September figures were going to be massively increased as they combined both the surge in largescale PV installations to beat the cut, the continued exponential growth in the domestic market that DECC had left unchecked, and the additional rent your roof schemes.
The impact assessment for this FIT reduction proposal shows that the budget estimates upon which this is based rely on a 70% cut in the rate of under 4kWp installations and a 95% cut in the rate of 4–50kWp installations. This is a ridiculous target for a policy designed to promote the growth of this industry, and we can’t possibly be expected to deliver the reduced costs we’re supposed to deliver under this scheme without the economies of scale the scheme is also meant to deliver from market growth.
We’d strongly recommend that DECC end their contract with their current consultants as their advice has been consistently wrong and their predictions have been hugely wrong.
(d) Affordability of Solar Photovoltaic energy versus other renewable energy (given the overall levy-funded cap for energy bills) and the impact of Feed-in Tariffs on energy bills
The aim of the feed in tariff was to stimulate growth in the PV market, and bring down solar PV costs over the next few years to the point where it can become cost competitive with other renewables. The PV industry has delivered this growth and cost reductions far faster then predicted by DECC to the point where we’re already cost competitive with small scale wind, and can become increasingly competitive with largescale onshore wind in the next couple of years given properly structured support and degression periods.
Why restrict this question to renewable energy though?
The nuclear decommissioning authority received approximately 50 x the entire FIT budget in 2011–12, and an increase in budget this year of many times the entire FIT budget.
The estimated costs of a new generation of nuclear power have more than doubled in the last 10 years, based on the experience elsewhere in Europe.
The actual costs of installed PV systems in this country has already dropped by around 40% in the 18 months since the FIT scheme started, with further drops of around 10% every six months seeming likely for the foreseeable future. We’ve also installed around 500MWp of solar generation capacity in the first 18 months of the scheme, whereas the first new nuclear station is still at least 10–15 years from generating anything at all, by which time we could easily have 20GWP of solar PV installed.
If properly supported, with proper degression rates to realistically match and drive down costs, I’d expect that the average lifetime cost per KWh of electricity generated from this 20GWp of solar PV should be comparable with Gas/coal by some time between 2017–20, or even lower if fossil fuel prices keep rising as fast as they currently are and PV costs keep falling through economies of scale.
23 November 2011