DECC has today published three documents relating to the Feed-in Tariff Comprehensive Review. There are two separate consultations on Phase 2 of the Comprehensive Review and the other document is a response to Phase 1 of the Comprehensive Review.

The first of the two consultation documents (2A) presents proposals relating to solar PV and will be open for 8 weeks and the second (2B) proposes changes relating to all other technologies (Wind, Hydro, Anaerobic Digestion and micro-CHP) and scheme administration issues and will be open for 12 weeks.

The new Secretary of State for Energy and Climate Change, Ed Davey, claims that the reforms “are designed to make that budget go as far as possible to maximise the number of people able to benefit from FITs; to provide greater certainty to the industries concerned; and to ensure value for money to consumers who pay the bills.”

The key points of the documents can be summarised as follows:

1. Consultation on Comprehensive Review Phase 2A: Solar PV cost control

Further Reduction To Solar PV Tariffs From 1 July 2012: The Government has proposed a new mechanism for changing tariffs after July, which includes:

• Automatic baseline degression (proposed at 10% every 6 months)
• With the ability for degression steps to be brought forward if deployment exceeds pre-determined levels
• Annual review to monitor the system.

The proposed mechanism for tariff degression after July is intended to provide “a reliable method of financial control while at the same time giving a good measure of certainty to the sector and to consumers about the future path of tariffs.”

The Government is also consulting on:

• a potential review of export tariffs – analysis suggests that the current 3.1p/kWh is undervalued and the proposal is that the Export Tariff be increased. Although the increase could lead to a higher rate of return it could result in the rate of return being maintained by proportionately reducing the generation tariff
• a reduction of the Eligibility Periods for solar pv from 25 to 20 years
• consideration of whether it would be appropriate to move from index-linked tariffs to nominal flat-tariffs individual installations.

The closing date for responses is 3 April 2012.
2.  Consultation on Comprehensive Review Phase 2B: Tariffs for non-PV technologies and scheme administration issues
New Tariffs For Anaerobic Digestion, Hydro, Wind And MicroCHP: DECC propose to introduce new FIT rates to take effect from 1 October 2012 and that all technologies should be subject to a tailored version of the cost control regime that is being put in place for PV technologies, including annual automatic degression and capacity triggers. DECC state that “the proposed tariffs reflect our conclusions on the costs and characteristics of each technology, taking into account the need for fiscal restraint and cost-effectiveness.”

Administration of the scheme: The consultation also seeks views on:

• The introduction of preliminary accreditation of installations so that investors can be sure of how they will be treated in terms of factors that potentially affect which tariff band they are allocated and whether preliminary accreditation should also fix the level of tariff at the point of accreditation
• Definitions of ‘community’ and ‘site’ and clarity around MCS accreditation
• The review of the operation and accountability elements of the FITs scheme.

The closing date for responses is 26 April 2012.

3. Government response to the 31 October 2011 consultation on Feed-in Tariffs for solar pv

New Tariffs For Solar PV Confirmed: In line with the announcement made by DECC on 19 January 2012, the licence modifications necessary to implement the new tariffs will come into force on or before 3 March 2012, and will apply the new tariffs from 1 April 2012 to any new solar PV installation with an eligibility date on or after 3 March 2012. There is still no certainty for installations with an eligibility date on or after the proposed 12 December 2011 reference date, and before 3 March 2012, due to the outstanding legal action. However, if the tariffs for those installations are reduced, they will receive tariffs not lower than those proposed in the Phase 1 Consultation. The full list of tariff changes can be found at the table contained on page 6 of the response document.

New Energy Efficiency Requirement: DECC has decided to proceed with an energy efficiency requirement for new solar PV installations with an eligibility date on or after 1 April 2012, as a pre-requisite of eligibility for the standard solar PV tariff rates. This will mean that new FITs applications for solar PV will need to demonstrate that the building to which the installation is attached to has an Energy Performance Certificate rating of Level D or above.

Multi-Installation Tariff Rates: Multi-installation tariff rates which will apply to all new solar PV installations with an eligibility date on or after 1 April 2012 where the FIT generator or the nominated recipient  receives FITs income from more than twenty five solar PV installations, located on different sites.

For more information, please contact:

Michelle T Davies
Partner, Head of clean energy and sustainability
Tel: 0845 498 7553
Intl: +44 29 2047 7553
michelletdavies@eversheds.com

Jean-Pascal Boutin
Partner
Tel: 0845 498 8265
Intl: +44 29 2047 8265
jeanpascalboutin@eversheds.com

Stephen Hill
Partner
Tel: 0845 497 7572
Intl: +44 115943 7572
stephenhill@eversheds.com