BUSINESSES which have invested in solar PV have been left reeling following the Government’s announcement of a 50 per cent “early” cut in Feed in Tariffs (FiTs).
The Department of Energy and Climate Change (DECC) had proposed that FiTs for solar schemes would be cut by more than half from April 1, 2012 but it has now stated that any project registered after December 12, 2011 would be downgraded to the lower rate from April 1, after initially receiving the current higher tariff.
There has been a significant uptake in solar PV deployment in our area and all across the UK since the FiT was introduced in April 2010, according to Andrew Watkin, who heads the Carter Jonas Energy Team from the firm’s Peterborough office in Priestgate.
He says that to cut tariffs early when members of the public, companies, developers and investors have all committed to projects, yet again has a negative impact on confidence and heightens the feeling of mistrust of the Government by those involved in the sector.
Mr Watkin added: “We had hoped that the review date of April 1, 2012 would have been adhered to, but following our warning on October 20, after the consultation meeting at Westminster with the DECC, yet again they have moved the goal posts, now suggesting rates of return for projects will be approximately 50 per cent lower once the new tariff rates are in place.
“This is frustrating for all involved in the solar PV sector and will result in redundancies as well as businesses going into receivership.
“The DECC is modelling on a return of 4.5 per cent. The issue for many will be that while Bank of England base rates remain at 0.5 per cent, low interest rates are currently being paid on cash held on deposit.
“It really boils down to whether investors are prepared to gamble on future electricity price levels and build those prices into the financial model for each project.”
Mr Watkin added: “We have also seen the introduction of the Renewable Heat Incentive (RHI) delayed this year. With the current economic turbulence in the Eurozone, investor confidence is unlikely to withstand another boom and bust business model in the renewable energy sector. The DECC should be intent on sticking to strategies to develop the sector with steady growth to ensure investor confidence is restored.”