Community renewable projects at risk from Feed-in Tariff changes

by Search Gate staff. Published Wed 19 Aug 2015 19:12, Last updated: 2015-08-19
Community projects are at risk from planned FiT changes
Community projects are at risk from planned FiT changes

As the Department of Energy and Climate Change consultation on removing the preliminary accreditation from the Feed-in Tariff closed today, industry leaders have warned of rising costs and an uncertain future for many projects.

The proposals will take away the certainty of knowing what tariff a renewable project will eventually get. Currently, projects have the guarantee of getting the existing tariff if they pre-accredit. These changes will mean they will only qualify for the tariff at project completion, meaning they will have to gamble on what that eventual tariff will be.

This is on the back of an inadequate consultation process with a lack of impact assessment the obvious criticism. The REA questions how a consultation with the intention of saving money be useful - without knowing how much will be saved and how.

The industry has come out in force to explain that the proposals will not just slow the deployment of renewables but will in some cases, kill off sectors entirely.

Head of Biogas, Dr Kiara Zennaro (REA) said: “DECC needs to urgently acknowledge that removing FIT pre-accreditation and tariff guarantees will be seriously detrimental to the AD sector. It will considerably increase the uncertainty of tariffs due to degression and make it impossible for investors to fund development and construction. In other words, it will kill deployment, as opposed to just slow it down.”

The REA claims the Government has stated a commitment to value for money, but by increasing the risks associated with renewable projects the cost of financing will increase, which will mean fewer projects are delivered for a higher cost, representing worse value for money.

With the FiT review due by the end of August, the REA believes it is not possible to consult on this in an effective manner without knowing the wider intentions for this policy, such as the degression mechanism and the tariff rates under the FiT.

Solar Policy Analyst, Lauren Cook (REA) said: “The degression mechanism has been designed to bring down tariffs in line with deployment and solar is already subject to possible quarterly degressions. The option of pre-accreditation has helped projects with longer lead times secure financing based on guaranteed rates. Removing the option of pre-accreditation will hurt the areas of the industry the government has expressed support for, such as commercial and industrial rooftops.

Other losers identified by the REA will be organisations, such as community, school and local authority projects, whose internal processes make such a gamble on future rates virtually impossible to commit to renewable projects.

Head of Policy and External Affairs, James Court, added: “Many communities, local authorities and schools are wanting to do the right thing in installing renewable projects and the government have previously seen this as an area they want to support. Yet this change will severely hit any such organisation, who by their nature have longer processes. For many, this will now be a non-starter, they couldn’t take the risk.

Brett Pingree, VP Commercial, Endurance Wind Power: “Pre-accreditation is a leading indicator for FIT spending, providing an estimate of energy production and FIT payments up to one year before projects are even commissioned. In this way, the pre-accreditation system gives Ofgem and DECC a one year forecast of FIT spend. To remove pre-accreditation would seemingly undermine their ability to manage budgets for the deployment of small-scale renewables.

“But the removal of the pre-accreditation would do most harm to farmers, and especially those who are already financially challenged. Even small wind projects take a long time to install because of lead times involved in securing planning approval and grid connection, as well as weather and periods of site inaccessibility such as during planting, growing and harvest seasons. For this reason, the 12 month allowance to complete the project becomes critical for arranging finance, as without the assurance of the FIT rate, banks will not provide loans.

“A thought-through, collaborative approach to the UK’s FIT scheme will enable the most cost effective measures to be put in place, while at the same delivering the clean energy, skilled jobs and inward investment that the UK requires.”

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