UK Feed-In Tariff Enjoys Early Success

The latest official figures published by UK energy regulator Ofgem (PDF) show that an impressive 15,468 installations have registered to take part during the first six months. 

The scheme, designed to promote the uptake of small-scale renewable electricity generation, has already paid out more than £2.5 million (around US $4 million) to applicants – with the subsidies proving particularly popular in the solar PV sector, which has accounted for the lion’s share (around 60%) of participants to date.

Solar has proved increasingly popular for several reasons.  Firstly, prices for the technology have decreased, making it much more attractive for consumers.  In addition, solar panels are now much more widely available across the country, meaning that people can buy them at their local DIY store and either hire a contractor or self-install, although it is important to remember that, in order to be eligible for the FiT, they must be installed by a company accredited under the Microgeneration Certification Scheme (MCS).

“Solar PV has become like any other household energy investment, like energy-efficient windows or insulation,” says David R. Jones, editor of Platts Renewable Energy Report.

“What makes it especially attractive now is that, with the guaranteed rate of return [offered] by the FiT, you can sit down with a calculator and figure out roughly when the investment will pay for itself,” he adds.

However, amid a climate of global financial austerity, similar FiT schemes are being gradually reduced across Europe.  In this light, it is perhaps likely that the UK will follow other countries, notably Germany and Spain, in scaling-back subsidies.

Many in the industry predict that FiTs will eventually be phased out as the various types of renewable energy approach grid parity – the price retail consumers pay for conventional energy – meaning that subsidies will no longer be necessary.

“Large-scale power plants, like offshore wind farms, and early-stage technologies, such as marine energy, will probably need some form of subsidy for some time to be viable,” says Jones.

“The key in phasing out FiTs – along with subsidies for conventional energy, which the International Energy Agency estimates far exceed renewables subsidies worldwide – is a gradual reduction in subsidies, to avoid any sudden shocks that would send investors fleeing, and to avoid retroactive cuts,” he adds.