Does your home make the grade? From 1 April homes must have an energy performance certificate (EPC) at grade D or above to qualify for higher feed-in tariff rates.
On 9 February the Department of Energy and Climate Change (DECC) released its comprehensive review of feed-in tariffs (FITs). Phase 1 of the review confirmed the new energy-efficiency requirements to be introduced from 1 April. Phase 2 focussed on making the scheme sustainable for the long term, proposing future tariff reductions linked to the rate at which the industry grows.
So what do the proposals mean for the future of the solar industry? And more importantly, how will our customers be affected?
A ‘holistic approach’ to carbon reduction
The good news is that, for many homes, an energy performance certificate at grade D is a lot more achievable than grade C, which was originally put forward.
DECC states: ‘We have listened carefully to concerns raised in response to the consultation and have decided that the energy efficiency requirement should be based on an Energy Performance Certificate (EPC) rating of level D or above, not level C or any other option as previously mooted.’
The rating will apply to both homes and non-domestic buildings installing and registering a PV system from 1 April 2012. It follows several claims by DECC that it ‘wants to ensure that solar PV is considered as part of a holistic approach to carbon reductions in buildings that prioritises energy efficiency.’
In other words, homes will only be credited with the full FIT rate if PV is used in conjunction with energy efficiency measures, such as cavity wall or loft insulation. Homes that fail to qualify will receive the much lower tariff of 9p per kWh – unless they can get their install completed before the 1 April deadline.
DECC estimates that over half (51%) of UK homes and 65% of non-domestic buildings are already rated at EPC grade D or above. For older properties especially, reaching the required standard will mean a bigger investment up front. To give a rough idea, it’s estimated that a detached home with cavity walls currently rated as F would need investment of around £1,280 to bring it up to EPC rating D. A mid-terrace house currently with an EPC rating of E and loft insulation existing would need around £530 of improvements to qualify for the full tariff.
The response also confirmed that for individuals or organisations having 25 or more systems installed, FIT rates will be reduced by 20% – the thinking being that those installing high numbers of system will be likely to benefit from economies of scale.
A gradual reduction for FITs
In the last quarter of 2011, the number of new solar PV installs soared as thousands rushed to cash in on the 43.3p tariff before it was whipped away on 12 December. It seems DECC has learned from this episode and is looking to put a more sustainable – and less damaging – funding system in place.
Energy Minister Ed Davey says: ‘It is no secret that the uncontrolled surge of solar installations in the latter part of last year, driven by rapidly falling costs, placed a huge strain on the feed-in tariff budget, threatening the Government’s ability to roll out those small scale low carbon technologies in the numbers we wanted over the next few years.’
In the second phase of the 9 February review, DECC proposes linking FIT rates to cost reductions and industry growth. It suggests flexing the FIT budget depending on the level of uptake, so the more systems are installed over one set period, the deeper the tariff cut for the next.
The document spells out a proposed schedule for reducing the payments in three separate stages – a cut of at least 20% form 1 July, then further drops in October 2012 and April 2013.
So, if you’re planning to install over the next few months, what sort of tariff can you expect?
Install before 3 March and feed-in payments should be 43.3p per kWh, though this may fall to 21p for those who installed after 12 December 2011, depending on the outcome of governments long-running appeal. It’s unlikely you’ll be able to find an installer with capacity to fit any more systems before this date.
Install between 3 March and 30 June and you’ll receive 21p per kWh.
Install between 1 July and 31 September and payments may drop to 16.5p-13.6p per kWh.
Install between 1 October 2012 and 31 March 2013 and payments may drop to 15.7p-12.9p.
Install from 1 April 2013 and payments may drop to 14.1p-11.6p.
After 1 July it’s proposed that the depth of the cut depends on the number of installation throughout March and April. The document points to three possible scenarios for systems of 4kWp and under:
Scenario A: if installations during March and April exceed 200MW the rate from 1 July would be 13.6p/kWh
Scenario B: if installations during March and April are between 150 and 200MW the rate from 1 July would be 15.7p/kWh
Scenario C: if installations during March and April are less than 150MW the rate from 1 July would be 16.5p/kWh
Further changes ahead?
Hidden away at the back of DECC’s review were two more interesting proposals, both of which will be subject to consultation. The first asked whether the 25-year lifespan of the FIT should be reduced to 20 years, bringing it in line with comparable schemes for other renewable technologies.
The second argued the case for moving from an index-linked tariff to a nominal (flat-rate) tariff for those entering the scheme. Here, DECC suggests that the index-linked model may not be the best match considering that the technology demands a high investment upfront and from then on has very low maintenance costs. It also makes the point that, where installations are financed by loans, repayments will not increase over time, but will actually reduce in real terms with inflation.
It’s worth reiterating that these two points are still subject to consultation, as are the FIT rates post 1 July. DECC is running an open consultation until 3 April, so there is still time for plans to change.
Points to remember
- DECC plans to reduce FITs further over the next year to reflect reduced costs and industry growth
- The government hopes this approach will secure the long-term future of the feed-in tariff by making sure it’s sustainable and that it benefits as many people as possible
- DECC is asking whether the lifetime of the FIT should be reduced to 20 years, and whether it’s appropriate for payments to increase in line with inflation
- From 1 April homes will need an EPC certificate at level D or above to qualify for the full tariff. If you’re looking to install solar PV but know your home may need extra work and investment to bring it up to standard, there’s still time to install before April