15 Feb 2011
The European Photovoltaic Industry Association (EPIA) cautions the UK government to act very carefully to avoid creating market uncertainty.
The UK government must tread carefully to avoid destabilizing the country’s emerging market for photovoltaics as it reviews feed-in tariffs for renewable energy generation.
That’s according to the European Photovoltaic Industry Association (EPIA), which is concerned that a long period of uncertainty while tariffs are reviewed earlier than originally scheduled will remove the kind of long-term visibility needed to attract investment.
Although similar financial support mechanisms have been in place in many European countries for several years, the photovoltaic feed-in tariff in the UK is less than a year old and was introduced under the previous government in April 2010.
The tariff is regarded as relatively generous, and has certainly sparked rapid growth in the UK market – monthly installations grew from less than 0.5 MW to 3.6 MW in the country just four months after its introduction, according to figures provided by the market analyst company Solarbuzz.
On February 7, Chris Huhne, the UK’s Secretary of State for Energy and Climate Change, confirmed that the tariff review had been initiated after 20,000 photovoltaic installations were registered under the scheme. Although Huhne sees the tariff as working well from a domestic point of view, he said, “I am concerned about the impact of super-size solar installations.”
Huhne said that the prospect of large-scale solar projects taking advantage of the UK feed-in tariff was not fully anticipated in the original scheme. “If left unchecked, [large-scale installations] could take a disproportionate amount of available funding, or even break the cap on total funding,” he explained.
Huhne is also committed to cutting 10% from the cost of supporting the feed-in tariff by 2014-15, and if a lot of large-scale installations receive planning permission, he is worried that this will become impossible, as well as “soak up” money intended to help homes, communities and small businesses generate their own electricity.
Stressing that any uncertainty in the UK market could impact it at such a delicate, early stage of development, EPIA Secretary General Eleni Despotou said: “In times of economic crisis, it is essential to encourage the development of a promising sector such as photovoltaics, which can create thousands of local jobs. The UK should raise its ambition and widely deploy photovoltaics.”
EPIA estimates that the sector ought to employ 17,000 people in the UK by the end of 2011 – citing figures from Photovoltaics International.
The organization recently condemned cuts in feed-in tariffs announced in the Czech Republic late last year, where the government has added a retro-active 26% tax to revenues generated by the local feed-in tariff. Meanwhile Spain has also passed a decree to cut support for existing installations - a move condemned similarly by ASIF, a Spanish association of photovoltaics companies.
“Investors have based their confidence on the stability that the feed-in-tariff scheme brings since it is guaranteed by the law,” said Despotou of the Czech government’s move, adding: “This decision will clearly break their trust in the renewable technology as a reliable investment and in the reliability of the Czech Republic as a safe place for investment.”
The UK tariff review is in part an attempt to avoid the costly mistakes made by Spain in particular, where an unsustainable investment bubble was created in the solar sector in 2007-2008, and which pre-empted those retro-active cuts.
However, in its statement announcing the feed-in tariff review, the UK government explicitly said that it would not be taking any such retrospective measures: “Any changes to generation tariffs implemented as a result of the review will only affect new entrants into the scheme,” it said. “Installations which are already accredited for FITs at the time will not be affected.”
The review of UK tariffs will be completed by the end of 2011, added Huhne, although large-scale photovoltaics projects, defined as those with a generating capacity of more than 50 kW, will be subject to a fast-track process, with any tariff changes being made “as soon as practical”.