News of falling photovoltaic (PV) panel prices reached MPs in March 2011 who did nothing to slow the booming levels of PV installations until end of October. When they did finally act, search it was with a knee-jerk consultation that set a 12th December 2012 deadline, proposing that there would be a reduced rate of 21p/kWh for solar installations of less than 4kW, half of the previous 43.3p/kWh. It is proposed that the new tariff will come into effect from 1st April 2012 and will affect all PV installations actioned on or after 12 December 2011. The rate of return will still be a useful 4.5%, but half of what had been enjoyed previously. There may also be an even lower tariff (80% of the new rate) if more than one solar system is installed, due to economies of scale, which may affect community solar projects.
The proposed cuts are part of Phase 1 changes (which will affect small-scale solar PV with a total installed capacity of 250kW or less), with Phase 2 coming later in 2012. The cuts may also be complemented by new domestic energy-efficiency requirements, which must also be met from 1st April 2012 or else the PV installation may receive an even lower tariff of 9p/kwh.
The UK Government consultation may demand that either a property’s efficiency is brought up to an EPC rating of C or above, or it must have all potential measures on its EPC for Green Deal finance carried out, with no additional finance required. This could mean that 86% of homes would need to be better insulated before they could qualify for the FIT, and could increase initial costs by between £5,600 and £14,000, and that’s without the cost of the PV panels even taken into account. It has been suggested that this may stop 9 out of 10 installations from going ahead.