Consumers Rush to Install Solar PV to Avoid Imminent Lower Feed-In-Tariff

People are racing to install solar PV systems to lock in the current feed-in tariff.
Published: Tue 11 Mar 2014

Ofgem’s announcement to decrease the feed-in-tariff for all sub 50kw systems by 3.5% from 1 April this year has kick started a major increase in solar PV and installations. This is according to Eco Environments which has reported a 30% increase in enquiries.

The headline feed-in tariff figure for installations sub 4kW is set to drop from 14.90p/kWh to 14.38p/kWh – this amounts to a drop of 0.52p/kWh.

Customers take advantage

Customers are racing to take advantage of the opportunity to save on their utility bills, get paid to generate clean electricity and enjoy tax-free returns that are index-linked and guaranteed every year for the next two decades. In order to lock in to the current feed-in-tariff, homeowners and businesses have to complete installations before 1 April.

The reduction feed-in-tariff is due to the high levels of installations across the UK with solar PV continuing to be the most popular household source of renewable energy. The government is reducing its support of solar (and onshore wind energy) because these renewable energy sources have received a significant amount of state support and investment and no longer require the state’s assistance. The government intends to shift its support to off-shore wind as it still lacks sufficient subsidies required to encourage long-term investment.

Other drivers of solar PV

Despite a shift in government’s support of solar, PV still offers the consumer good value for money. The technology has become much cheaper -mostly due to oversupply during the recession which has resulted in cheaper installations.We discuss this in our article Cheaper Solar Installations – Watershed Moment for Distributed Generation and Renewables.

Solar offers the consumer cheaper power . By 2030, the cost of solar should be comparable to that of even the dirtiest forms of coal, and of gas, according to the Imperial College London. In addition to this, solar is also becoming a form of income as consumers become prosumers.

Another major driver towards solar PV is the highly publicized electricity price hikes announced by the Big Six utilities in the UK. All of the Big Six energy providers announced price hikes of around seven percent at the end of last year; with four of the six main suppliers cutting back their gas and electricity prices in the past few weeks, in line with the Government’s deal to cut green levies. However, these large suppliers are still more expensive than the smaller suppliers.

Therefore, without state support, solar seems to be established enough to develop without subsidies.

According to Nick Green, an associate director at Savills Energy, who advises landowners and developers involved with wind farms and other renewable energy infrastructure, the degression rates have been broadly in line with expectations and in some cases less severe than anticipated. He added that renewable projects remain a viable opportunity for landowners and developers looking to invest: “With a stable rate of degression, payback time will only increase marginally; we’re talking a few years, rather than decades, with room still for good return on investment.”

Further Reading

Ofgem-Adjusted tariffs 2014/2015[pdf]