Clean Energy Cashback will benefit early installers most

Most countries in the EU now use guaranteed price Feed-In Tariffs (FIT) to support renewable energy projects, with different prices being fixed for each type of technology.

The FITs have proved to be very effective at getting capacity installed rapidly at relatively low costs. For example, Germany has installed 25 Gigawatt (GW) of wind generation capacity so far under a FIT scheme , whereas the UK, with its competitive Renewable Obligation Certificate (ROC) trading scheme, has only achieved 4 GW, with some of that actually being supported by grants (for offshore projects). And this in a country with a far better wind regime than Germany.

With the UK committed to getting 15% of is total energy from renewables 2020, which means they would have to supply maybe 30% of its electricity, something had to be done. The UK governments remains wedded to the market-orientated ROC system, and it has made some changes to it – e.g. creating ‘technology bands’ with different numbers of ROCs for each type of technology. That may help to some extent – making it a bit more like a FIT. But the government eventually conceded that a fixed-price FIT system might be better for small-scale projects. There was some debate about how small ‘small’ should be, but a ceiling of 5MW was chosen- large enough to include some small community projects.

The governments proposals were for a fixed ‘Clean Energy Cashback’ payment from the electricity supplier for every kilowatt hour (kWh) generated (the “generation tariff”); i.e. for self-generated power you use, plus a guaranteed minimum payment additional to the generation tariff for every kWh exported to the wider electricity market (the “export tariff”). The export tariff will be market determined – it’s currently at £0.05/kWh, for electricity delivered to the grid. Proposed generation tariff levels were set at 36.5p/kWh for retrofitted PV solar systems up to 4kW; and 28p/kWh for systems up to 10kW, while wind projects would get 30p/kW for turbines below 1.5kW and progressively less for larger units, down to 4.5p/kWh for wind turbines between 500kW and 5MW. Hydro projects would get 4.5-17p/kWh depending on size. Anaerobic digestion and biomass were also eligible (getting up to 9p/kWh), so was AD fired combined heat and power (11p/kWh), but not landfill gas or sewage gas, which are deemed already commercially viable.

As with the German FIT, UK FIT prices will be reduced, or ‘degressed’, in annual stages to reflect expected reductions as the technology develops and the market for it builds. But only for some of the technologies. The annual degression was set at 7% for all solar PV projects, 4% for wind turbines below 1.5kW, 3% for those in the 15-50KW range. The rest would have no price degression.

Source - Environmental Research