Consultation question 957 unique responses
Q5 Which of the options for changing the export tariff outlined above would best incentivise renewable electricity deployment while controlling costs and enabling the development of the PPA market? How should we account for the additional and avoided costs to suppliers associated with exports in setting the export tariff? Please provide reasons to support your answer.
Summary of responses
Government sought views on a variety of longer-term measures to 1.50.
ensure the export tariff is sustainable. Responses to this question were received from 36.5% of respondents, with the majority coming from the renewables industry and private individuals. Of the options proposed, there was only very limited support for re-basing the export tariff at a lower level, some limited support for withdrawing the right for >50kW installations to opt for the export tariff, and moderate support for an annual re-set of the export tariff to a wholesale power price index. However, the most frequently
occurring response was for the current system to remain in place because those considering installation of FIT-scale technologies highly valued the certainty of a fixed tariff at a level sufficiently high to incentivise investment.
Options for changing the export tariff
Where respondents supported re-basing the export tariff to a lower 1.51.
level, this was often because respondents favoured a lower fixed rate tariff rather than a potentially higher but fluctuating tariff, as this provided greater certainty to investors, reducing financing costs. Other respondents felt that a lower export tariff could help to incentivise behaviour viewed as desirable for the purposes of alleviating grid constraints, such as self-consumption or the installation of storage.
Respondents who supported withdrawing the right for >50kW 1.52.
installations to opt for the export tariff felt that generators of this scale could participate effectively in the power purchase agreement (PPA) market. Some respondents suggested alternate thresholds for the right to opt for the export tariff to be withdrawn, for example 30kW, 100kW, 1MW or 1.5MW. However, a larger proportion of respondents stated that smaller generators and
community projects would not be able to effectively participate in the PPA market.
A limited number of respondents supported removing the right to opt 1.53.
for the export tariff for all installations and requiring all installations to participate in the PPA market; some respondents noted that this would require reform of the PPA market to allow domestic generators and
community projects to participate effectively on an individual basis or at an aggregated level. The main reason given for this proposal was that PPAs more accurately reflect the value of exports according to locational, time of day or seasonal factors than the export tariff itself.
The proposal to annually re-set the export tariff to a wholesale power 1.54.
price index was supported by respondents who felt that this would more accurately reflect the value of these exports at the time they were generated. Some respondents suggested a more frequent re-set, for example on a quarterly or six-monthly basis.
Although a number of individual specific proposals were put forward, 1.55.
more generally, there was broad support for a move to meter all exports, though there were some technical concerns and concerns around privacy raised. There was also broad agreement that any changes should apply to future generators only. However some respondents, particularly small suppliers, preferred that the changes should apply to all generators.
Some small suppliers in particular highlighted concerns about the 1.56.
wholesale price falling below the export tariff for both new and existing installations. A key concern was that suppliers may be reluctant to offer PPAs if the financial loss to the supplier could be significant, which would in turn cause damage to the PPA market. A solution was suggested of
including supplier export tariff payments in the levelisation fund by reversing the removal of the Secretary of State’s discretion to include export payments in levelisation fund that was introduced in the FITs Order 2013. This could include applying the changes to all generators rather than future generators only. Alternatively, rather than including such supplier export costs in the levelisation fund, it was suggested that these be refunded to suppliers from general taxation.
Some respondents questioned whether the wholesale power price was 1.57.
an appropriate proxy for the value of exports. The reasons given were that a fixed and flat rate export tariff does not reflect factors such as local grid constraints, time or season of exports, or wholesale price changes; all of which contribute to the value of the exports at that particular time or location. A number of alternative indexes were proposed, for example against clean energy PPA contracts or the SSP (system sell price, potentially average time weighted). It was also suggested that different tariffs and methodologies should be adopted depending on whether a project was standalone or connected directly to a source of demand.
A few respondents questioned how FITs generators could be provided 1.58.
with a route to market once the export tariff expires after 20 years. It was felt that without such a route generators may remove equipment that is still functioning and capable of exporting electricity; solutions suggested including the export tariff portion indefinitely or increasing the export tariff portion to 30 years. In the shorter term, some respondents also stated that it would be helpful to have certainty now regarding the status of the export tariff once the cap has been used up in order to inform investment decisions that will be taken shortly.
Government decision
As set out in the consultation document, Government is not proposing 1.59.
to make any change to the export tariff at this stage. However, Government notes the concerns made by some small suppliers and considers the export tariff is in need of reform in order to ensure it is sustainable and to ensure there is clarity over its long-term future. The responses to this question will be used to frame a detailed consultation on these issues in future.