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FIT Comprehensive Review 26th January 2012

As you are no doubt aware the FIT tariff court case has been ongoing now for a nuber of weeks without producing a result either way.  Yesterday the Court of Appeal unanimously rejected the Government attempts to overturn last month's High Court ruling that its plans to rush through sudden cuts in solar tariff payments are illegal.  However, while the Appeal was rejected the government have asked the Supreme Court for the permission to appeal.

What does this mean for tariff rates?

This does not affect the Government's proposal to cut rates to 21p for systaems installed after 3rd March 2012, because that reduction has followed the correct procedure with regulations being tabled in Paliament already, and the cut coming after the 40 day period required by law.

There is still some uncertainty about the rates paid on installations fitted between 12/12/2011 and 3/3/2012 because it is not yet clear whether the Government will be allowed its appeal.  However, the minimum tariff that people installing in this period will get 21p, and if the Government's Appeal is unsuccessful or should they decide to withdraw it, then they would get the 43.3p rate (for sub 4kW system).

The message for new customers is simple. Install by 31 March, and the rate you receive is guaranteed to be no lower than 21p per kWh*. When you consider that panel prices are coming down, this gives a substantial return of up to 8-9%. There’s also a chance that your rate may be raised to 43.3p* per kWh depending on the outcome of an appeal by the Department of Energy & Climate Change (DECC). Either way, you’re guaranteed a good deal, as long as you act quickly.

* Please note these figures are based on a < 4kW (retrofit installation) please see below for a table of all new proposed tariffs.

John N Dunn Group can still generate you a Return on Investment of around 10% and upwards

Under the proposed new tariffs, a well sited 2.6kW domestic PV installation costing around £6500 could result in FIT payments (generation tariff plus export tariff) of around £500p/a, and total FITs revenue of £730 p/a (nominal undiscounted) once bill savings are taken into account.

This combined with an estimated bill saving of around £270 p/a will result in a return of around 11.4%.  In a world of low interest rates, this remains a competitive investment opportunity for households.

Commercial installations are still an attarctive investment.  A 10kW system will cost £23,500 and could result in FIT payments of around £1,100pa, combined with a bill saving of £1030 this will still result in a saving of around 10.6%.

A 25kW system will also still result in a Return on Investment (ROI) of around 10.6%.

Proposed new tariffs for Solar PV

Band kW Current Generation Tariff (p/kWh) Proposed Standard Generation Tariff (p/kWh) Proposed Multi Installation Rate (p/kWh)

4kW (new build)                

 37.8 21.0  16.8 


43.3 21.0  16.8 
 > 4-10kW 37.8  16.8  13.4 
 > 10-50kW 32.9  15.2  12.2 
 > 50-100kW 19.0  12.9  10.3 
 > 150-250kW 15.0  12.9  10.3 
 250kW-5MW 8.5  8.5*  8.5* 
stand alone  8.5 8.5 * 8.5* 

*Note that these are the current tariffs which, like all other current tariffs, will be adjusted in line with the Retail Price Index from 1st April 2012.

We urge those looking to install solar PV to act now and get the best rates for 25 years.  There are incentives to act sooner rather than later.

Please visit our case study page to see examples of work we have done to date.

Details of the Comprehensive Review

To control spending, the government state they have no option but to propose revising tariffs for most solar PV to bring the expected rate of return back to around 5%.  The government is proposing to:

Phase 1

  • To reduce solar PV tariffs from 1st April 2012, with the lower tariffs applying to all new Solar PV installations with an eligibility date on or after 12 December 2011.  For domestic PV, this would mean a reduced tariff from 43.3p to 21.0p with similar cuts for larger installations.
  • Strengthening the link between FITs and energy efficiency from April 2012, with properties that do not meet minimum energy efficiency levels receiving FITs at a lower rate (9p/kW).
  • Introducing a new multi installation tariff rate from April 2012 to reflect the lower costs for aggregated schemes e.g. rent-a-roof.

Phase 2 (expected to be announced before 9th February 2012)

  • A proposed tariff for other FIT Technologies.
  • A set of reform proposals for the scheme.  This will likely get into the issue of 'degression' (the method by which the FIT steps down over time for new installations).
  • It is likely to introduce some form of proposed 'capacity cap' trigger almost certainly during the next FIT year.

The government’s proposals will restrict solar PV FITs costs to £250m-£280m (nominal undiscounted) in 2014-15, and will save consumers around £23 (2010 prices (undiscounted) on their annual energy bills in 2010 compared to not taking action.

What next?

The Government has formally asked  permission for the Appeal Court to take this matter to the Supreme Court.    This however does not necessarily mean Ministers have decided it will do so - at the moment they may simply be keeping the option open.  The Appeal Court judges will make a decision on whether to grant permission in the next few days - if it is granted, the case can go to the Supreme Court.  If permission is refused the Government would still have the fall back option of applying to the Supreme Court itself for permission to appeal.  But this would add a further step in the process- and at each step the chances of success for the Ministers recede a little further.

Until then?

Install now and the minimum tariff for installations between 12th December 2011 to 3rd March 2012 will be 0.21p.  If the Government loses the Appeal to the Supreme Court, then these installations will get the higher rate of return of 43.3p until the 3rd March.  You can still make a good return on investment of around 10% (based on <4kW retrofit installation).

We can help
The John N Dunn Group is a leading national building services company based in the North East.  It delivers outstanding renewable, plumbing, heating, electrical, mechanical and security services to the construction industry as well as installation, repair and service for the facilities management, commercial and residential sectors.  For more information, please contact us.

Please note that all calculations are based on a 30 degree south facing roof, with no shading, using SAP 2009 Figures.  The tariffs are using the new 31st October 2011 FIT Review.  Those looking for a quote will require a technical survey to ascertain the exact costs.

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