FiTs cuts endangering manufacturing

This week the UK Government has been accused of putting British manufacturing at risk and putting more pressure on the British farming industry by slashing feed-in tariff payments for small and medium scale wind turbine developments by 20%.

The 20% reduction to the popular and successful feed-in tariff scheme is due to come into effect on the 1st of April this year. This deadline has created a rush within the renewable energy industry to complete the installations of wind turbines, solar panels and anaerobic digestion plants before the end of March.

Prominent members of the UK’s solar panel industry have voiced confidence that the industry is well placed to cope with the 3.5% cut being introduced to the feed-in tariff payments for  domestically generated solar energy. However the far more severe cuts being introduced to the UK’s small and medium scale onshore wind industry are set to be far more problematic.

Many within the onshore wind industry and the wider renewable energy industry have voiced concerns that the severity of the soon to be implemented cuts will create a number of issues. Firstly, the cut runs of risk of provoking capital flight as investment in onshore wind energy is driven overseas. Secondly the cuts will create a barrier to smaller investors who are far more likely to invest their money in smaller scale wind energy developments. Lastly the cut threatens to negatively impact upon British manufacturing at a time when all the rhetoric is about encouraging, supporting and enabling the country’s manufacturing base.

It should be noted that it is not just the cut to the feed-in tariff itself which has raised concerns. The banding which determines what level of feed-in tariff a development receives (based upon the developments capacity) is also being changed. Up until last year, turbines of a scale up to 15kW received higher feed-in tariff payments than developments of a larger capacity. This fact helped to make small scale wind turbines an attractive investment to community groups, farmers and public concerns such as schools who are looking to reduce energy costs.

However under the new rules sub 15kW developments will now be placed in the same band as developments with a capacity of up to 100kW. This represents a significant leap. Some have suggested that this will encourage investment in the larger schemes which the government may now find more favourable however it comes at the cost to deterring smaller investors and community groups. This was point made by Gaia Wind’s Chief Executive Johnnie Andringa:

“There are a lot of small companies working in this area and the feed-in tariff helps make the product more affordable but now smaller turbines are at a disadvantage because they are in the same band as turbines ten times their size.

“It will be more difficult for small farmers or crofters to put up a small turbine and generate their own electricity”.

Keith Parslow, Chief Executive of Leicester-based small turbine manufacturer Evance made a similar point:

“You have to put in 20 of our 5kW machines for every one of the 100kW machines installed, so it really is unfair for the smaller user, it’s driven people to make do this as more of an investment… and it means our typical prospective customers are now unsure whether they can justify the investment, unless they live in an area of really high wind speeds.”

Evance is now known to be focusing its attention on the export markets to mainland Europe and the Far East.

The impact of the feed-in tariff cuts on the small and medium scale wind market is particularly unfortunate given that the majority of wind turbines manufactured within the UK fall into this scale. It is far more common for developers of  larger scale projects to import their turbines from foreign markets than it is for developers who are working on a smaller scale. At a time when so much political emphasis is placed upon supporting the British manufacturing sector it is regrettable that a government policy would work against the interests of British manufacturers. A point underlined by turbine manufacturer Ampair’s Managing Director David Sharman:

“It’s certainly going to decrease the market for small wind, which is why we now sell around two-thirds of our products overseas. We just don’t trust the British government.

“It’s a wonderful own goal by the British government to cut the tariff and damage the industry. We told them that it would harm manufacturing and they just didn’t care.”

Industry trade group RenewableUK also flagged up the potential dangers to the UK Government. Deputy Chief-Executive Maf Smith commenting:

“The UK’s world-leading small wind sector has already seen reductions of domestic installations due to the removal of the different tariff brackets for all turbines under 100kW. Small wind is a UK manufacturing success story now under huge pressure, and the thousands of farmers and small businesses up and down the country who want to generate their own power face disappointment if these changes go ahead.”

The UK Government has attempted to calm the situation. A DECC spokeswoman emphasised the feeling that the UK’ small and medium scale wind market is well placed to overcome any hurdles presented by the reduction to the feed-in tariff.

“The changes reflect the need to drive cost reductions in the sector, following significant deployment. The FITs scheme continues to support the deployment of small scale wind turbines. The number of degression bands was minimised when the degression mechanism was implemented to reduce distortions within sectors.

“Onshore wind is a major success story for the UK which brings economic benefit to our shores, supports thousands of skilled jobs and is an important contributor to our energy mix.

“As costs come down for more established technologies like solar and onshore wind, it is right that the level of public support is reduced to protect consumers.

“In line with new EU guidelines on competition and to deliver best value for money to the taxpayer, the government is considering introducing competition between more established large-scale low carbon technologies and will make a decision on this in 2014.”

We at Intelligent Land Investments (Renewable Energy) would stress that we feel well paced to handle the feed-in tariff reduction. Many of our tubine developments are already installed. Many more have secured the higher feed-in tariff rate as developments were pre-accredited with the regulators to ensure that there would be no mad rush to complete developments over the next two months.

 

 

 

 

 

 

 

 

 

 

 

 

 

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