Feed-in Tariff Pre-accreditation

As part of the UK government’s continued policy overhaul on renewable energy it was announced last week by the Department of Energy and Climate Change (DECC) that pre-accreditation would be removed from the feed-in tariff.

Pre-accreditation allows developers to lock in the tariff for wind and solar projects above 50kW and all hydro and anaerobic digestion projects once they secure a grid connection and planning permission.

In 2012, two years after the launch of the Feed-in Tariff, it was announced that the digression would start as a result of that year’s consultation on the tariff. However to assure investors that the income per unit for the project would remain stable during the often long development phase they could pre-accredit a project if they had the necessary components of planning permission and a grid connection.

Last week however it was announced on the back of a four week consultation into removing pre-accreditation that it would be scrapped essentially removing the capability of guaranteeing a project tariff. The response document (which can be read in full here) stated that abolishing tariff guarantees is “of critical importance” in ensuring the overall value for money of the policy and “limiting the impact of rising policy costs on consumer bills.”

Energy and Climate Change Secretary Amber Rudd said the changes would keep bills “as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way.”

“Our support has already driven down the cost of renewable energy significantly,” she added. “As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies, which is why we’re taking action to protect consumers, whilst also protecting existing investment.”

Pre-accreditation is especially important to community and corporate projects. As the ability to lock in tariff would be removed developers would be reluctant to enter development phases due to the risk of the final tariff not being enough to cover capital costs.

The proposal to end pre-accreditation was initially put forward in July with a consultation period that followed. Shortly after a wider range review of the entire tariff was announced proposing deep cuts to the levels of support for medium sized renewable energy projects from 2016 in a bid to reduce the overall government spending on the projects over the next two years.

The DECC has stated that if can achieve its reduction targets it will consider reinstating pre-accreditation for at least some of the technologies. They have said that this may provide long term investor confidence in the long term however also acknowledging that it would create “considerable uncertainty in the short term.”

It is thought that the government wishes to lessen the amount of t#new medium scale renewable energy projects as it is feared the Levy Control Framework (LCF) clean energy subsidy budget may overshoot its target by £1.5 billion by 2020 and the Feed-in Tariff spending alone could double from £1 billion to £2 billion by 2020.

Over the four week consultation period the DECC confirmed they received nearly 2,400 responses with only 16 backing the removal of pre-accreditation. Of those who opposed the changes, many warned that it would undermine investor confidence and that DECC had failed to provide enough evidence to back up its claims of tariff overspending as detailed above.

The government were also criticised for not producing an impact assessment alongside its proposal and for the relatively short consultation period which was claimed to be unfair as it did not comply with Whitehall best practices. However the government counter argued that it had provided adequate information in its proposals.

Already there have been calls from the industry for the consultation period to be extended by twelve weeks. Also trade bodies RenewableUK and the Renewable Energy Association sent a joint letter to DECC complaining that the consultation lacked an accompanying impact assessment, which made it impossible for respondents to answer the consultation questions appropriately.

On the back of this as well as the other renewable energy subsidy cuts announced this summer a coalition of British investors have written to Chancellor George Osborne, urging him to increase support for the UK’s renewable industry.

The letter co-ordinated by the UK Sustainable Investment and Finance Association (UKSIF) and signed by thirteen investors highlights concern over recent policy changes affecting the renewables sector, including aggressive cuts to solar and onshore wind subsidies.

Focussing on the benefits renewable energy brings to the UK the letter asks for a stable policy framework to help create a low risk environment for investment. Also it argues that several of the recent policy changes have a retrospective aspect that risks ongoing energy investment in the UK.

“As long-term investors, we believe the government needs to set out clearly how it intends to continue down the path of decarbonisation,” the letter says. “We urge you to introduce measures that bring greater security to the UK energy network and increase clarity and consistency to boost investor confidence in the future.”

With the Paris climate summit upcoming later this year and the likelihood of new decarbonisation targets the letter argues that a low risk environment is crucial in enabling the UK to reduce its carbon output whilst keeping development costs low.

UKSIF chief executive Simon Howard said “The UK already has its own commitments under the Climate Change Act and it is very likely there will be agreement on a new package of measures to tackle climate change in December.”

“In meeting those commitments the government will need to rely on the private sector to finance low-carbon energy infrastructure. These changes will highlight the short-term nature of the policy regime and will do nothing to install confidence towards future investment.”

This letter is one of several that have reached the government this year regarding their environmental policy changes. The National Trust and RSPB were amongst a number of environmental groups that expressed major concern over government plans to abandon key policies in July and the following month more than two hundred companies and bodies called on the government to reconsider its decision the cancel the long in planning zero carbon homes standards.

Later that month Scottish and Welsh ministers jointly wrote to the government to warn that discarding the Feed-in Tariff pre-accreditation would threaten the future of community based energy schemes.

The impact on such schemes was also highlighted by those within the industry as well. Howard Johns, author of Energy Revolution and former managing director of Southern Solar, said the proposals would do “irreparable damage” to Britain’s rapidly expanding renewable energy industry.

“In particular, many groups of hard working people striving with their neighbours and friends to develop and build local renewable energy systems will be stopped in their tracks at the eleventh hour by these careless proposals,” he said.

Emma Bridge, chief executive of Community Energy England, said the plans could undermine the government’s community energy strategy launched in January.

“Government must retain workable incentives that support the community energy sector,” she said.

The policy changes announced by the government over the summer have all but halted the growth of the most advanced and least expensive methods of renewable energy generation in the UK, solar and onshore wind. With decarbonisation targets to be met along with a new raft expected to be announced at Paris it is hoped that our government has a contingency plan in order for us to achieve these.

However at present we are not aware of any. Plans for carbon capture plants look too far behind the curve to  make a significant impact in time and the proposed Hinckley C nuclear plant has again been subjected to delays with developer EDF now hinting that it may not go ahead at all unless a new pricing plan can be agreed. The current subsidy proposed for Hinckley C is double that which wind and solar used to receive.

This will mean our reliance on imported fossil fuels will continue to grow. As well as doing nothing for our decarbonisation targets it places our energy future in unstable foreign markets. It is our government’s responsibility to create a safe and secure energy future for its civilians. At present ours seem to be doing the complete opposite.

 

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