Still fit for purpose

Feed-in tariffs are not exactly flavour of the month right now given the unholy row between the Government and the solar PV industry. But they still have their place, believes Matthew Rhodes

The most recent chapter in this sorry tale includes a final appeal to the Supreme Court by a Government wounded by earlier legal rulings, and the publication of a new consultation setting out major changes to the UK’s solar PV feed-in tariff from 1 April this year. Feed-in tariffs (FITs) look like being a battleground for some time to come.

But it might surprise you to know that I am a huge fan of FITs, despite everything.

FITs are actually a very efficient and effective way of creating a level playing field for all building-scale renewable energy technologies.  They give market power to customers, provide long-term certainty for investors, deliver rewards on real, metered performance, and encourage the development of flexible and innovative business models.

The basic concept and mechanism of a feed-in tariff is elegant.  It also imposes minimal regulatory burdens on the industry or customers.

However, to realise the full potential of FITs – including their potential to grow a competitive and thriving market for renewables in the UK – the scheme must be managed with vision and skill.  It demands a feel for the sector which goes beyond responding to the latest lobbying by one or other technology special interest group.

In this light, the latest announcement on solar PV FITs is a mixed bag.

What’s the good news? 

First is the step by the Department of Energy and Climate Change (DECC) to provide longer-term stability to the market through publishing a rationale for regular degression. In particular, there are now details in the new consultation which appear to recognise that some solar PV projects (such as those on social housing) have longer development times.  Such schemes may in future be able to secure commitment to specific tariff rates ahead of the commitment of funds.

Also good is the tacit recognition that not all projects people claim to be developing are always real. DECC’s future policy on feed-in tariffs will be based on what’s actually happening in the market rather than what they fear might happen.

There is also a very positive proposal to allow at least the possibility of competitor schemes to the Microgeneration Certification Scheme, which introduces healthy competition into what is currently an unnecessary monopoly with potential to distort development of the sector.

But what’s the bad news?

My company has always offered whole house energy efficiency and renewable energy solutions as a single package. So we were disappointed at the linkage of FITs to Energy Performance Certificates (EPCs), in any form or at any level. The latest proposal says that only homes that achieve an energy rating of ‘D’ will be eligible to receive feed-in tariff payments from solar PV.

Yes, it’s better than the earlier requirement for a ‘C’ rating. But this still introduces an unnecessary burden and set of constraints into an otherwise very simple and low cost mechanism.  It discriminates against hard-to-treat homes where simple micro-generation technologies like solar PV might well be the best way to lift the occupants out of fuel poverty.  EPCs also lack the rigour to be meaningful ‘guides to investment’ for real householders.

Of course, encouraging energy efficiency is a laudable goal and an urgent imperative. But it would be better delivered through positive incentives to customers who can then drive market demand, rather than by imposing burdens on installers.

Ultimately, I’m still most disappointed at the continued, systematic bias in DECC policy towards larger-scale renewables. Just take a look at the arbitrary budget caps and degression triggers for solar PV.

When it comes to the construction and small-scale renewable energy sectors, the market has already demonstrated there is substantially more scope for innovation, customer engagement and economic growth in these sectors than there will ever be in large scale infrastructure projects like offshore wind, marine or nuclear power.

In grouping building-scale renewables with large power systems, DECC is making a fundamental category error.  It condemns what should be a dynamic segment of the mass construction industry to being a centrally-planned laggard – especially when compared to the same sectors in other countries and our economic competitors worldwide. The ultimate result is higher prices for energy bill payers and a severely handicapped micro-generation sector in the UK.

In recent years the Government has swung between vague microgeneration ‘strategies’ and horribly over-specified ‘road maps’.

In fact, there is a happy medium between these two extremes.  And fit-for-purpose FITs could be the key.

I can see scope for a technology-neutral, stable and well-managed mechanism like FITs which rewards outcomes not lobbying. It would not be constrained by a budget cap, but instead evaluated regularly and thoroughly, based on total costs versus total benefits to energy bill payers.

This is eminently possible and practical, once the blinkers of the archaic centrally planned energy industry mind set are removed.

• Matthew Rhodes is managing director of Encraft, an independent consulting engineering firm specialising in distributed energy strategy, on-site renewables and low carbon buildings.

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