Government to reward renewable energy homes with higher feed-in tariffs

Household solar panels will get higher feed-in tariff than proposed but level of support to renewables industry unchanged

Ashley Seager
guardian.co.uk, Monday 1 February 2010 18.24 GMT
The government drew back from a step-change in its proposed levels of support scheme for small-scale renewable energy schemes amid attacks by the Conservatives and campaigners for a lack of ambition.
Unveiling the new so-called feed-in tariffs (FITs) paid to people, communities or businesses who generate electricity from solar panels, wind turbines or other renewable sources, energy secretary Ed Miliband said the government still only intended that the sector would supply 2% of the country's electricity by 2020 – the same figure he proposed last summer.
Some technologies such as solar photovoltaic panels on household roofs will get a higher feed-in tariff, and, importantly, all tariffs will be uprated with inflation each year. But large-scale community wind turbines will get a lower tariff than proposed last year, leaving the overall level of support to the industry little changed.
The FITs for new projects will be held at the current rates for two years but then cut by 8.5%, more than originally planned.
Miliband said: "Our plans represent a significant level of ambition and are comparable to countries that are leading in this area."
But he acknowledged that the overall aim was to produce 2% of the country's electricity by 2020 – much less than the 6% campaigners say is realistic.
He also said the FITs would still only offer 5-8% return on investment, unchanged from last summer's proposals and well below Germany's typical level of 10%. But documents from his energy and climate change department show that the inflation-linking of tariffs will push nominal (not inflation-adjusted) returns up to 7-10%.
The Conservatives said this still lacked ambition and hinted they would do more if they win the election this spring.
Shadow energy secretary Greg Clark said: "FITs are essential to allow decentralised energy to play a major role in our energy mix, but Labour's proposals today lack ambition. Ministers should have been bolder with this scheme so more jobs could have been created and greater emissions reductions achieved."
His Liberal Democrat counterpart Simon Hughes said: "This will disappoint anyone looking to do their bit to contribute towards our energy supply. Another opportunity has been squandered. While dozens of countries already support home energy generation, Labour's plans are too little too late. The government has given in to the nuclear lobby at the expense of community-led power generation."
Miliband would not be drawn on whether the new system would mean more money flowing from the existing energy companies into renewables.
He pointed to an increase of almost all the FITs across the various technologies since the proposals were announced last summer. But the detailed documents showed that the proposed 5 pence per kilowatt hour for power exported to the grid had actually been cut to 3 pence.
Dave Timms, spokesman for Friends of the Earth, which led the FIT campaign said: "The introduction of cash incentives to boost small scale green electricity generation is welcome. However, ministers have been far too timid with a policy that could make a significant contribution to cutting emissions and boosting energy security.
"Installing renewable technologies will now be a good investment for many homes – but farmers, businesses, communities and others will get little or no extra incentive to invest in clean electricity."
Last week a YouGov survey for FoE, the Renewable Energy Association and the Co-operative Group revealed that two thirds of people think that the government's feed-in tariff plans are not ambitious enough, and 71% of homeowners said they would consider installing green energy systems if they were paid enough cash.
But Miliband insisted that the plans were good. He said a family installing a typical 2.5 kilowatt peak photovoltaic system would earn £900 a year and save them £140 on their annual electricity bill.
The Renewable Energy Association said that gave a return on investment of 9%, which they liked. Spokeswoman Gaynor Hartnell, said: "The potential impact on households, businesses, farmers, schools and virtually every other energy user you can think of should not be underestimated. The balance of power has shifted. Instead of being tied to fossil fuels and energy price fluctuations, people and communities can now take control of their energy supply and their energy bills."
But the REA was concerned that biomass boilers had been removed from the FIT scheme and were not happy with the treatment of anaerobic digestion systems.
Campaigners were also unhappy that people who had invested in renewable energy systems in the past decade would not qualify for the full FITs of up to 40 pence per kwh, receiving only 9 pence. Officials defended the decision, saying they were aiming to bring new systems online, not reward existing ones, some of which had received a grant.