Consultation question 828 unique responses
Q13 What would be the impact if FITs continued as an export-only tariff for new generators on reaching the cap of £75-100m additional
expenditure? Please provide your reasoning.
Summary of responses
Government sought views on the impact if FITs continued as an 2.110.
export-only tariff for new generators on reaching the cap of £75-100m additional expenditure. Responses to this question were received from 31.5% of all respondents, with the majority of responses coming from the renewables industry and private individuals. The vast majority of
respondents stated that without the generation tariff then future deployment would be significantly curtailed and that the result would be the closure of renewables firms and corresponding job losses. It was also suggested by some respondents that social housing providers would possibly scale back plans to install FITs equipment because the export tariff alone would not provide sufficient returns to proceed with future projects.
Impact of proposal
There was moderate support for a move to an export tariff only FITs 2.111.
scheme. For some respondents, this was only because this was preferable to the total closure of the scheme and cessation of all tariffs. For other respondents, this was because they felt that efficient installations would still receive sufficient returns from both the export tariff and through bill savings from self-consumption (where the project was not stand-alone) to make investment worthwhile, with PV the technology most often highlighted as being sustainable under an export tariff only regime, particularly if the European Commission’s Minimum Import Price (MIP) for solar PV modules was removed.
A few respondents suggested linking the export tariff to wholesale price 2.112.
or other indexes, while small suppliers in particular noted the potential damaging impact on their business models if the FITs scheme continues as an export tariff only regime without reform of the export tariff level or
levelisation process. Linked to this, it was also noted that those considering installing FITs technology may be deterred by the prospect of an export tariff that could vary over time, with a flat rate (though inflation indexed) tariff more attractive to investors because of the certainty this provides.
A number of respondents noted that moving to an export tariff only 2.113.
regime would not incentivise self-consumption or the installation of storage, both of which are desirable for their whole system efficiency and stabilisation
benefits; given that bill savings at the retail price are higher than revenues through the export tariff, DECC considers that incentives for these desirable behaviours are somewhat inherent to the FITs design. Some respondents claimed that the proposed generation tariffs were so low as to effectively make the scheme an export tariff only regime in the near term, and others stated that changes to the scheme were undermining confidence in it.
Some respondents drew attention to particular groups (usually 2.114.
community projects, social housing projects, school projects, domestic installations, hydro installations or AD installations) that would be particularly impacted by such a change; in some cases, an exemption from any changes for such groups was requested. However, given the current State Aid
approval for the scheme, Government wishes to avoid any change which would require a re-notification to the European Commission A few
respondents believed that removing the generation tariff would make the UK less likely to meet various renewables targets; however, as set out in the consultation document, Government does not expect that implementation of any of the proposed changes will adversely affect the ability to meet the UK’s renewable electricity and carbon reduction targets.
A number of alternate measures were proposed. These included 2.115.
replacing FITs with net metering, or retaining the generation tariff and
instead removing the export tariff; which DECC considers would not achieve the objective of cost control nor pay a fair price for the electricity exported. The notion of only paying tariffs until the installation and financing costs had been repaid was suggested; DECC considers this to be administratively complex and susceptible to gaming or perverse incentives. It was also noted that in certain parts of the country, grid constraints mean that it is not
possible for FITs generators to export to the grid, therefore rendering them unable to receive the export tariff (the examples given were Orkney,
Shetland, parts of Cornwall and parts of Wales).
Government decision
Government does not intend to implement a decision at this stage on 2.116.
the long-term future of the FITs scheme. Government’s view is that keeping generation tariffs available, within a system of caps where declining tariff trajectories provide a path for certain technologies to become less reliant on subsidies, offers an opportunity for only the export tariff to be available for new generators once the cap has been used up. Government will consider the future of the export tariff but believe at this stage that it may need to be adjusted for new applicants to better reflect the costs and benefits of renewable energy generation across the whole grid.