Caught between protests over cuts to feed-in tariff support for domestic solar PV installations and the need to reduce the impact on householders' electricity bills, the Government is considering a “capacity trigger” system to reduce the amount of the help larger systems are given, and spread the support over more installations.
It's one idea that will be proposed in consultation documents which DECC is expected to publish before the end of the year, and it is known to have the support of both the Secretary of State, Chris Huhne, and energy minister Greg Barker.
In Germany, FITs for solar modules will be reduced by 15% next year, but the amount of the tariff is reduced depending on the generation capacity of each installation.
The tariff is calculated by adding an overall reduction of the tariff (9%) to an amount relative to what is installed. For example, an installation above 3,500 MW of new PV capacity would entail a 12% reduction, while 5,200 MW would entail a 15% reduction.
A parliamentary advisor to Mr Huhne, Duncan Hames, is quoted as saying: “It would be naive not to plan for future cost reductions in panels. We need tariffs that will mirror reality and we should look to what they have been able to do in Germany to have a smoother path on the way to solar competing with other industries.”
The idea comes from a report looking at how to design solar PV tariffs to maintain rapid growth while limiting costs to taxpayers, which was published this summer by investment advisors Deutsche Bank, and called The German Feed-in Tariff for PV: Managing Volume Success with Price Response.
Under Germany's new Renewable Energy Action Plan, which is now based on ideas in the report, solar PV will generate 41 TWh of electricity per year for as much as 7% of 2020 consumption.
Wind energy will contribute 100 TWh or nearly half of the 217 TWh of renewable generation expected by 2020. Solar PV will deliver nearly 20%.
Policymakers are looking at ways to limit the cost of solar PV development not only in absolute terms but also relative to other renewables.
Triggers for cost reduction can also be time-based or cost-based.
As PV systems have seen a 50% cost reduction in less than two years, it is important that in 25 years time, the lifetime of the guaranteed tariff, electricity bill payers are not contributing what could by then be a completely disproportionate amount.
The Renewable Energy Association, which has fought the reduction in the FITs in the UK, has indicated that a capacity trigger "could be helpful to us" as "it would mean that if the price of panels doesn’t come down as anticipated, the model would account for that.”
One criticism of this solution is that, per installed unit of capacity, the cost of installing many separate systems is greater than that of installing a smaller number of higher systems. Therefore the cash available will support less, not more, generation capacity.
Judicial reviewChris Huhne has come under prolonged criticism over the FITs policy shift. Lord Teverson, LibDem spokesman on energy in the House of Lords, has said he should have thought through the changes earlier and had not shown “good management” of the process.
Almost three times as much solar capacity than expected by DECC had been installed by October, in 100,000 separate installations with over 400 megawatts of capacity.
Yesterday, the solar industry, backed by hundreds of supporters, took their protest to Parliament.
At a meeting chaired by Seb Berry, Head of Public Affairs for Solarcentury, a panel including Shadow Energy and Climate Secretary Caroline Flint, Caroline Lucas, the Greens' MP, Alan Simpson, the ex-Labour MP who helped design the Feed-in Tariff, and Chairman of the Solar Trade Association (STA) Howard Johns, attacked the cuts.
Friends of the Earth announced they had issued a request for a judicial review on the Government consultation's December 12 deadline for solar PV installations at the current tariff rate.
The campaign body's Executive Director Andy Atkins said, "The solar industry has been one of the UK's brightest success stories in the last two years, helping homes and communities across the country free themselves from expensive fossil fuels.
"We believe these plans are illegal as well as ill-advised - so we are taking action to bring ministers to court."
One casualty of the cuts in FITs has been a 26-acre solar farm in Chewton Mendip that was being developed by Ecotricity, which it says would have generated enough power for 1500 homes.
Also abandoned is a £6 million scheme to fit solar panels on 1,000 council houses in Kirklees.
The tariff rate for large installations like this has been cut by 70%.