Tuesday, March 1, 2011

Fighting FiT

Solar photovoltaics (PV) face some problems- with tariff levels being cut back and/or capacity caps imposed for to Feed In Tariffs (FiTs) in Spain, Germany, France and planned in the UK.

The basic problem is that the FiTs had stimulated to market strongly, which was what they were meant to do, so that demand for PV had boomed. But under the FiT system, that led to what some saw as excessive costs being loaded up on consumers, who pay for it via their bills. Spain had already imposed a cap and then Tariff cuts which in effect crashed the Spanish solar boom.

The French government talked about a ‘speculative bubble’ and imposed a three-month halt to new PV installations over 3 kW, while legislators worked on new tariffs for larger PV installations, which were expected to include rules providing caps on development and lowering feed-in tariffs for solar PV projects. The government also played the China card. ‘Most panels installed in France were made in China with a highly questionable carbon footprint,’ Environment Minister Nathalie Kosciusko-Morizet said, whereas the policy must “create jobs in France, not subsidise Chinese industry.’ Even so if current developments are completed, France could still reach its 2020 target of 5.4 GW of solar capacity by the end of 2011.

Meanwhile, after much bitter wrangling, the German solar industry agreed solar PV tariff reductions with the federal Government. PV had boomed with over 14GW being installed. In mid- 2010 industry lobby organization VIK, had claimed that the continued high growth of the German PV-market could result in most ratepayers having to pay an extra 3.5 eurocents/kWh in 2011 compared with the present 2.047 eurocents/kWh, and more later.

Figures like this were disputed, but the German solar industry association (BSW-Solar) eventually agreed to a compromise under which feed-in-tariffs will be reduced according to the amount of solar electricity installed annually, with a sliding scale of reductions based on capacity predictions. For example, if the calculated solar PV market capacity for 2011 year was over 3.5 GW, tariffs would be reduced by 3%; if the projected capacity was 7.5 GW, tariffs would be reduced by 15%. As previously planned, funding will also be cut by a further 9% at the turn of the year 2012. Renewable Energy Focus commented ‘This new step is seen as an earlier than planned reduction, following warnings against the artificial stimulation of the solar market.’

There will be a review of the EEG (the German Renewable Energy Sources Act) in 2012, which will presumably play a decisive role in the future of PV in Germany.

The savage cuts in the Feed In Tariff for PV in Spain were imposed by Royal Decree, and were said to be retroactive i.e retrospective for existing projects, although the government later denied this. Btu there were major protests by people whose jobs were threatened, with protestors from all over Spain wielding PV panels. One said ‘the Government is bowing to the pressures of major energy companies and is misleading citizens into believing that the tariff deficit is a problem created by renewables’.

The Spanish Association of Renewable Energy Producers said ‘it appears Parliament has given itself over to the electric utilities to do away with the solar PV sector in this country’. Congress approved the Decree by 175 to 12, but with many abstentions. There are likely to be a lot of legal disputes as thousands of PV array owners are hit.

The UK is to review its small ‘Clean Energy Cashback’ Feed In Tariff, with the budget saying support for PV was to be cut back in 2013, leading to a £40m saving in 2014/15 (10%), ‘unless higher than expected deployment requires an early review’. And if need be, access to the FiT might be limited for large solar farms on greenfield sites before the review. That review was originally planned for 2012. but has now been brought forward, since DECC said, there is ‘growing evidence that large scale solar farms could soak up money intended to help homes, communities and small businesses generate their own electricity’. So far around 40 MW of PV has been installed under the scheme out of about 77MW in all- tiny by comparison with Germany and Spain, but much more than before. However the new ‘fast track’ review of PV projects larger than 50kW looks like slowing things to a crawl.

DECC’s concern about solar farms is not shared by all. For example, Adrian Lea, manager of planning and regeneration at Cornwall council, insisted solar farms were a positive development: ‘It begs the question of what the purpose of a feed-in tariff is for. To me, the purpose [of the tariff] is to develop a solar PV industry, to bring forward renewable energy infrastructure within the UK, and to meet renewable energy targets. In terms of solar panels, I don't think you're going to do that on domestic roofs because the rate of installation, while highly commendable, is pants, quite frankly.’ But, if nothing else, it’s a good excuse for a review -and for cuts.

So what next? Given the global recession, extra costs to consumers were obviously politically difficult, even if in fact they were much smaller than other energy price hikes. But it does mean that the growth of PV, and the reduction in price that the FiT system would then yield, will be slowed. It’s a failure or nerve, at the very least. The FiTs are designed to gradually reduce prices, as they help build markets. But you have to stay the course.

The UK government is trying to limit the problem of short-term consumer costs in its proposed new Electricity Market Reforms by adopting a variant of the FiT which has a strong market element and possibly also contract auction/tenders to keep prices down. That’s not really a FiT at all- it’s more like the old Non Fossil Fuel Obligation, which saw many successful tenders but few actual projects, since companies often bid at unrealistically low prices. Hence the campaign for a real FiT – with fixed, although annually degressed, tariffs. And without nuclear included. The worry is that with nuclear included, there will be less for renewables. See: www.guardian.co.uk/environment/2010/dec/27/wrong-policy-on-renewable-energy and http://realfeed-intariffs.blogspot.com

The message is that if we want a proper FiT, we will have to fight for it- and also to protect the existing one.

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