It seems that the Department of Energy and Climate Change (DECC) *may* have learnt from its series of solar-related legal disputes.
This time round, instead of taking immediate emergency action to revise subsidy rates the government has taken a rather more creative approach.
Soon after entering office, the Conservatives realised that the Department of Energy and Climate Change was going to be a problem. The latest internal analysis revealed that the Levy Control Framework was all but spent, including the 20% emergency headroom.
Given the wider austerity message and Treasury’s calls for £20 billion worth of cuts to Whitehall budgets, the Conservatives were never going to allow such a perceived overspend to continue.
The solution? Nine different green energy schemes have been cut or culled in the last fortnight.
Solar RO (Renewable Obligation) was unsurprisingly first up on the chopping block, partnered with a change to the pre-accreditation process for feed-in tariff projects. At first glance the proposed changes don’t look as bad as the industry had prepared itself for. But DECC has quietly introduced something that has the potential to be far more destabilising than immediate, harsh cuts…uncertainty.
Let’s look at the RO first, and the explosive removal of ‘grandfathering’. As part of the recent consultation, DECC is proposing that all solar farms installed between 22 July that aren’t eligible for the grace period will no longer have their support grandfathered.
Essentially what this means is that DECC can intervene at any point during the project’s lifetime and change the level of support a project receives. As DECC confirmed to Solar Power Portal on Monday, this will apply to both roof- and ground-mounted projects.
So now developers have the unenviable task of trying to convince investors to part with their money without even knowing what return they could be in line for. The problem for commercial rooftop owners is even more acute; how can you convince skeptical stakeholders that going solar is beneficial when you can’t even predict what level of support you will receive when you connect it?
Another change that DECC is looking to implement is to remove the pre-accreditation process for the feed-in tariff. The pre-accreditation process allows installers to lock in a proposed installation’s feed-in tariff rate ahead of the install being completed. DECC’s proposed changes would again hit the commercial rooftop sector the hardest. Currently, ROO-FiT pre-accreditation gives a six-month window for installers to complete and connect a system. Crucially, this window allows installers to give potential customers the exact financial modelling for the proposed array. With the pre-accreditation process removed and an imminent announcement concerning the major review of the feed-in tariffs, installers won’t be able to give customers potential FiT rates with any degree of certainty.
All this means that those in the solar industry are the ones who will end up shouldering all of the risk. Do you guarantee the feed-in tariff rate to give some certainty to clients, putting enormous pressure on the company to deliver ahead of any potential tariff degressions, not to mention putting the project at the mercy of Ofgem’s accreditation process?
If DECC’s proposals don’t budge at all during the consultation period than solar at all scales will have no idea what level of support it will receive from the government until the site is accredited and generating.
I don’t believe that it is cynical to suggest that DECC knows exactly what impact its proposed changes will have. They are designed to drown the sector in uncertainty and put a halt to the perceived ‘runaway solar subsidy train’ – all without breaking any laws.
Well I’m sure we’ll find out if the proposed changes are legal and, going off past consultations, the industry isn’t holding out much hope for sizeable revisions to the department’s proposals.
Originally published by Peter Bennett on Solar Power Portal 31 July 2015