Tariff degression was introduced as a cost control measure as part of the comprehensive review of the Feed-in Tariff (FIT) scheme in 2011/12. The degression mechanism means that tariffs available to new generators across all FIT technologies reduce automatically over time without the need for a formal tariff review. To offer greater certainty to industry, preliminary accreditation (pre-accreditation) was introduced to help with the uptake of the scheme among groups lacking experience of deploying low carbon technologies. Pre-accreditation is available to solar PV and wind projects above 50kW as well as to all hydro and anaerobic digestion (AD) projects.
Pre-accreditation gives generators a guaranteed tariff level in advance of commissioning their installation, provided a project is commissioned and full accreditation applied for within a specified window. To qualify for pre-accreditation, a project must have planning consent and a grid connection agreement. The duration of the pre-accreditation validity window for each technology reflects expected construction times which is currently six months for solar PV.
Assuming pre-accredited projects progress to full accreditation, their support under the FIT scheme is funded through the Levy Control Framework1 (LCF), a cost that is ultimately passed on to consumers. Because the level of pre-accreditation applications provides an indication of future budget spend, the capacity of pre-accredited installations is counted towards committed spend under the scheme and therefore contributes to degression triggers for the period during which they pre-accredit. This capacity is counted regardless of whether installations then go on to achieve full accreditation
Since its launch in 2010, the FIT scheme has seen deployment, and therefore expected spend, significantly outstrip expectations. The pre-implementation Impact Assessment in 2010 for the scheme anticipated that, by 2020, the scheme would deliver approximately 750,000 renewable installations; as of May 2015, over 700,000 installations had deployed. Pre-accreditation has contributed towards those elevated deployment levels.
At the same time, the latest projections of spend under the LCF are now forecast to be £9.1bn in 2020/21 (2011/12 prices). These latest forecasts have shown that uptake of Government’s renewable energy schemes continues to be higher than previously expected. This is combined with lower than expected wholesale electricity prices and accelerated developments in technology efficiency. As required by the EU State aid approval for the FIT scheme, the UK Government is currently preparing a review to consider the appropriateness of current tariff levels and the scope for further cost control measures. There will be consultation on a wider package of proposals as part of this review later this year. However, given that both deployment and spend under the scheme have outstripped expectations, the role of pre-accreditation in bringing forward deployment under the scheme must be reviewed.
The Government proposes to remove pre-accreditation and pre-registration from the FIT scheme. This will have the effect of removing the link to the tariff guarantee for installations currently able to pre-accredit under the FIT, such that installations will only receive the tariff rate as at the date they apply for full accreditation. This will mean that a developer will not be certain of the level of support they will receive under the scheme until the point at which their application for accreditation is received by Ofgem. This corresponds to the existing situation for most sub-50kW solar and wind projects as well as installations under the Renewables Obligation.
The consultation asks the following questions:
- Do you agree that, in the context of deployment and spend under the FIT scheme significantly exceeding expectations, it is appropriate to remove the ability to pre-accredit from the FIT scheme?
- Are the assumptions the Government is making on the impact of removing pre-accreditation reasonable?
- Are there additional measures which could achieve the objectives of encouraging deployment under the scheme while ensuring value for money under the LCF?
- Are there groups or sectors where it may be appropriate to reintroduce pre-accreditation in the future?
We value your views on the above – please email your responses to firstname.lastname@example.org or call Melanie Kendall-Reid on 01252 878722 to discuss this further. The deadline for submitting responses is 19th August 2015.