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UK solar FITs one year on: Successful stimulus?

1 Apr 2011

One year on from the introduction of the UK feed-in tariffs aimed at stimulating small-scale renewable energy technologies, there is still heavy demand being witnessed in the solar industry, despite the scale-back of the incentive scheme.

On 1 April 2010, the UK government (then led by the Labour Party) unveiled its revolutionary subsidy scheme for renewable energies, set to reduce the country’s reliance on nuclear and coal, and increase micro-generation electricity sites.

The scheme was initially hailed as a great success and by August – just four months after its installation – energy regulator Ofgem had received applications for more than 4,000 individual projects. Together, these amounted to 11.27MW of decentralised clean energy.

The FITs, unlike their European neighbours, are only applicable to projects sub-5MW and cover a whole gamut of renewable energy technologies from wind to anaerobic digestion. But overwhelmingly, demand for the solar sector outpaced other clean technologies.

Such a rush was witnessed that the UK’s now Conservative-Liberal Democrat coalition government set upon an early review of the tariffs awarded in February of this year, much earlier than the originally slated 2012 date.

The proposed results of this are now back and although areas such as waste-to-energy are likely to receive increased support, the government has proposed to cut subsidies to solar installations at the higher end of the 5MW top-end limit.

The decision has drawn much criticism from investors, one of whom told NewNet that the industry’s longed-for security has been swept away from the financial community’s feet.

The announcement within days of an independent study by the Pew Charitable Trusts found that the UK has slipped from fifth to 13th place in terms of clean energy investment.

It found that overall clean energy investment in the UK during 2010 dropped by a massive 70 per cent, in a complete reversal of global trends.

Many investors in solar systems greater than 150kW – including business parks, retail outlets and agricultural sites – are now putting their projects on hold.

Lee Siddons, head of renewable energy solutions at Jones Lang LaSalle EMEA, says, ‘I am disappointed that such a drastic change came in now. It would have been more appropriate if the FIT scheme looked like this in the first instance, which would have allowed for the renewables market to plan accordingly.’

The UK public is still very much open to the potential that rooftop solar installations can bring, however.

New research by Sharp Solar, featured on Click Green, shows that 62 per cent of the 1,000 homeowners questioned are aware of the solar FITs that are now in place. In addition, about half (48 per cent) are still more likely to install solar panels because of the scheme.

Even more tellingly, the majority of UK homeowners (56 per cent) would look to install solar panels on their home.

This popularity has led to a stampede of small-scale solar installers being established, a trend that has been quickly accompanied by words of caution about project quality and a widespread call for industry standards to be more strictly enforced.

The ongoing uncertainty, however, is still causing market volatility with funds such as Matrix pulling its venture capital trusts due to the government’s change in tack.

There are still many investors who remain positive about the growth of the industry. A diversified strategy, and an ability to generate returns not solely reliant on government whim, however, is likely to be a more popular approach going forward.

Copyright © 2011 NewNet

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