Community Energy Requires a Feed-in Tariff Rethink

The feed-in tariff has been responsible for kick-starting small to medium scale renewables in the UK. I, like many other renewable energy enthusiasts, was grateful for its introduction in 2010 and have been riding the emotional roller-coaster of uncertainties and cuts from pretty much that moment onwards. The famous solar cut of late 2011, which resulted in the gutting of a booming industry which had sprung 

up to take advantage of the very high tariff levels that were briefly on offer, has been followed by further cuts in solar and other technologies in every year since.

Representatives from DECC have repeatedly spoken out in favour of the feed-in tariff, including in the fall out of David Cameron's unfortunate comments about the 'green crap' adding to our energy bills. The 'green crap', it turns out, was not supposed to include feed-in tariffs or the Renewables Obligation, which together accounted for 3% of an average combined energy bill in 2012 (a little over 6% of the average electricity bill). DECC’s representatives were arguing that the tariffs stimulate investment in small-scale renewables by helping projects to offer good and stable returns. However, an interesting and perhaps ill-fated feature for UK feed-in tariff system is its in-built flexibility - the tariffs, and therefore project returns, are never likely to be as stable as you might hope, due to their founding legislation.

The feed-in tariff is supposed to be a tariff that reduces, or is subject to 'degression' at set intervals. As a safeguard for the government, this degression can be maneuvered so that the feed-in tariff budget does not get out of control, adding too much weight to consumer energy bills. Degression is controlled in the following ways:

Pre-planned Degression (default)

Degression has been set to take place at the following pace:


Contingent Degression

This is an element of degression which is informed by the actual level of uptake of different technologies. This element is highly unpredictable and is further complicated by the introduction of pre-accreditation, which allows current tariff levels to be guaranteed for projects which expect to be built out in a certain time period (the exact rules differ between technologies).

This contingent element means that if deployment is lower than expected, degression can be reduced or avoided altogether, but if deployment exceeds the expected levels of uptake, then the degression level is increased. There are multiple corridors for such over uptake with increasingly sharp degression adjustments.

Annual Tariff Reviews

The government reserves the right to make changes to tariff levels on an annual basis, if the tariffs are not deemed to be serving their policy objectives.

So, does this system suit community energy? Unfortunately I don’t think it does. Despite our collective best efforts, community projects face more hurdles, rely on volunteer time and simply cannot run apace with commercial endeavours. As much as I’d like to deny it, I have been on both sides of the fence, and the reality is stark.

In 2014 we face the possibility of a massive 20% cut in hydro feed-in-tariffs with likely cuts above the default levels for other technologies. The pre-accreditation system is a double-edged sword - causing a rush to pre-accredit, but ultimately likely to cause a backlog of unfunded sites and an increased tariff degression in the short term.

Community groups cannot handle the deadlines that degression brings in the same way that commercial entities can. Despite moving through planning quicker (and with a higher chance of success!) community energy is very different to the commercial sector. Pressure on volunteer time, horizontal decision making structures and delays with project milestones, such as land agreements and raising of funding all contribute to the fact that many ongoing community energy projects will miss this year’s pre-accreditation deadline (December 31st) and will be subject to unknown, but predictably high, feed-in tariff degression. On the other hand, commercial developers will not be taking on new projects that they do not expect to be able to pre-accredit before the end of the year.

There is an ongoing argument that the maximum project size allowed under the feed-in tariff scheme should be raised to 10 megawatts. Indeed, this was stated as a clear objective in DECC’s recent Community Energy Strategy. For the vast majority of community energy groups, however, a more subtle, imminent and ongoing threat is posed to their projects through unpredictable and unrealistic* degression levels, and an inability to meet the tight deadlines to which commercial developers will be working throughout 2014.

I don’t believe that the currently feed-in tariff system suits community energy, which is a crying shame given the fantastic support that it offers to small-medium scale renewables, the scale that is often ironically referred to as ‘community scale’. Community groups are hard to rush and are therefore most at risk of facing multiple degressions. It would be an unenviable task to work with community projects if a race to pre-accreditation had to be at the forefront of the agenda. I am yet to see evidence in the sector of project timelines being reigned in to acknowledge the threat of tariff degression, but perhaps this simply adds yet another strain to development processes which are already fraught with difficulty.

The way that the feed-in tariff system relates to community energy projects needs a rethink – with the way that pre-accreditation and degression are applied given an overhaul – the timelines simply do not suit. Raising the maximum project size allowed under the feed-in tariff scheme is a nice idea, but for most community energy groups that I know, a distant and irrelevant dream that detracts from the possibility of their projects becoming non-viable due to the current ill-fitting, one size fits all, policy.

* Unrealistic refers to the current policy that pre-accredited projects count towards actual uptake of renewable technologies. The reality is that many pre-accredited projects will never be built.

Vijay Bhopal

Vijay Bhopal

Operations Director, Scene.