STA Policy Asks – Making Feed in Tariffs Work
Making Feed in Tariffs Work
A Solar Trade Association Policy Paper – August 2016
Overview
The Feed-in Tariff (FiT) is not working for the solar industry. In some FiT bands the quarterly
deployment caps are too low, constraining meaningful markets. In other FiT bands the tariffs
themselves are too low to stimulate investment. This is damaging the industry and its potential to
drive down costs in future. We therefore propose a series of logical improvements to the scheme that
we would like to see enacted via a consultation in autumn 2016. We believe these improvements can
help restore healthy functioning of the FiT scheme and support a meaningful solar industry in the UK,
goals we hope the Government shares. These improvements come at little extra cost but leverage
potentially very large investment. The two key objectives of our improvements are to:

Develop a meaningful commercial rooftop market
Previously identified by government as a strategic area of focus, with lots of cost-effective
deployment potential, the current caps limit commercial bands severely. The capacity caps for
the >50kW band must be increased. The increase can be part-funded by redistributing savings
gained to date from sharper-than-expected tariff degressions against the budget to increase
capacity in the >50kW band. This would be a one-off quarterly volume top-up at no extra cost.

Remove unnecessary barriers
Removing barriers to deployment such as the inhibitive EPC requirement and guaranteeing
seamless eligibility for FiTs at the next available tariff would make the system simpler for
installers, at no extra cost.
Summary of Feed in Tariff Policy Asks
<10
 - highly relevant ,  - relevant kW
One-off emergency cap top up of 70MW at no extra cost
Increase caps by 3x from Q1 2017, rising to 5x by Q2 2019 (cost of
around £6.1m, see impact assessment)
Monitor deployment levels, allowing for tariff increases where

required
Lower degression rate from 10% to 5%

Change energy efficiency requirements to match RHI scheme

Re-introduce extensions to be made eligible for FiTs
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Guarantee eligibility and seamless accreditation in next FiT when cap
is reached
Extend pre-accreditation from 6 months to 12 months
Introduce pre-accreditation for the 10-50kW degression band
Publish near real-time information on progress towards caps
Base deployment reporting on FiT applications, not MCS certificates
1050kW
>50
kW
Stand
alone
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STA Policy Asks – Making Feed in Tariffs Work
Commercial rooftop solar potential
Using Ofgem data, it is estimated that there was 450MW of >50kW solar across 2,000 rooftop installations
as at the end of December 2015. Commercial deployment therefore represented only 4.5% of the
estimated 10GW total cumulative UK capacity at this time. The government previously encouraged a
refocus on this sector for good reason; two thirds of electricity demand is used in the industrial and
commercial sectors and, with self-consumption upwards of 50%, this is a highly efficient application. Many
solar companies including Engineering Procurement & Construction companies (EPCs) consequently
redirected their resources to the commercial segment, developing their expertise and market offer. With
the ~ 72% drop in tariff, and the introduction of a stringent ‘cap’, the market is now struggling and few
projects are coming through. Breaching the cap is not an indicator of market vitality, as the cap has been
set too low.
Our members have indicated that many of the pre-accredited September 2015 projects were never built
out within the 6-month window, suggesting actual deployment is even lower than the official data
presents. Solar is a sector which needs volume markets to deliver cost reductions, to secure jobs and to
deploy in line with the CCC’s 40GW of solar modelled under their ‘high renewables’ scenario by 2030.
The technical potential of commercial rooftop solar is vast. A Kingspan study in October 2014 showed there
are 2,500km2 of south facing commercial rooftops in the UK. This equates to 382GW of solar, but the
technical potential is far higher if east and west roofs are considered. 3.4% of domestic homes currently
have solar. If the commercial sector was to match this domestic percentage of solar deployment, it would
take over 200 years to achieve at the current constrained cap of 60MW/year. Put another way, we would
need a run rate of 919MW/year from 2017 to 2030 to achieve just 3.4% solar on commercial rooftops.
Since the changes to the FiT scheme in January there has been a 78% drop in the average quarterly
deployment for <50kW compared to 20151, i.e. we are installing 1/5 of the rooftop solar we were last year.
Rooftop solar PV deployment under Feed-in Tariff
400
MW
350
>50 kW
300
>10-50 kW
250
>0-10 kW
200
150
100
50
0
Q1'15
Q2'15
Q3'15
Old FiT regime
Q4'15
Q1'16*
Q2'16
Q3'16 (to 16
Aug)
New FiT regime
*Q1'16 only showing deployment under new FiT regime (since 15 Jan)
1
Average quarterly deployment for all solar <50kW in 2015 was 228MW compared to 50MW in Q1 and Q2 2016.
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STA Policy Asks – Making Feed in Tariffs Work
Why do severe caps damage commercial rooftop solar markets?
Feedback from the industry demonstrates there are many limitations of overly-stringent caps:
1. In absolute terms caps can simply be set too low. 15MW/q, or 60MW/year is an outright volume
cap per year. Many larger companies contributed to a 1,500-2,500MW/year market in recent years.
This very significant drop in forward volume is insufficient to sustain the sector, hence the near
80% drop in job losses for some of these organisations.
2. Low volume caps mean rapid degression. Breaching current caps results in 10% quarterly
degressions across all future tariffs. We anticipate that caps will be breached in each of the next
quarters. By April 2017, therefore, the >50kW tariffs will be 40% lower than the original tariff. This
rate of degression is too steep to sustain the market.
3. Loss of market weakens companies and ability to drive sales. With the loss of all support schemes
bar FiTs, companies must downsize significantly to reduce overheads. Volume drives jobs; capped
and constrained volume reduces demand and jobs are lost. With budgets and staff significantly
reduced, there is a lost ‘push’ to market rooftop solar.
4. Commercial rooftop owners are deterred. The investment decision process for business owners is
typically up to one year, which is very difficult to tally with the current scheme for many reasons:
 The 72% drop in tariffs, and a low volume cap with regular 10% degression
 Inability to predict which tariff they can use to model returns
 No guarantee of eligibility to the FiT if you miss the quarterly volume & join ‘the queue’
 Limited information on where you stand in ‘the queue’
 Possibility that spill across multiple caps means stacks of queues for eligibility
 Unwillingness to take degression or queue risk (unacceptable to pass to installer)
 The sheer loss in scale and ambition for the rooftop solar market
 Many barriers still remain in place e.g. landlord/tenant, EPC D etc.
5. Loss of volume stalls cost reduction. Theoretically, commercial rooftop solar should be one of the
first sectors to reach socket parity, given high self-consumption. Volume is essential to achieve the
economies of scale & investment needed to reach that goal.
Raising the caps - what is the STA asking for?
Whilst the STA membership has deep concerns about the cap mechanism for the reasons outlined, we
accept the need for Treasury to control the overall expenditure on subsidy schemes. But it is a question of
balance; raising the caps to support more healthy market function, while meeting the cost-control needs of
the Treasury would be wise. Given current degression trajectories, the alternative risks further decline. We
therefore advocate the following measures:
1. A one off increase in the >50kW quarterly cap volume for Q3 as a ‘top-up’ based on the recycled
underspend from the overall solar pot as proposed in DECC’s consultation response in December
2015
2. Based on the savings within the scheme to date from degression in the >50kW and the stand alone
bands, this would allow 70MW to be added for the 3q 2016 caps at NO additional spend beyond
the existing maximum solar spend.
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STA Policy Asks – Making Feed in Tariffs Work
3. This immediate boost in volume would mitigate further short term degressions in this important
band, allaying the immediate concerns of commercial rooftop owners.
4. There are no proposed cap increases or decreases, or transfer of underutilised volume from the
<10kW or the 10-50kW bands, however the small savings to date from the automatic degression
are included in the 70MW top-up.
5. A sustained increase in the cap volume is essential in the >50kW band thereafter. We calculate
£6.1m would be needed for a 3 fold cap volume increase from 1q17, rising to a 5 fold increase by
April 2019. This forward visibility should attract investors, solar installers and commercial rooftop
owners back into the market. These measures are discussed in more detail below.
Policy asks for the Feed in Tariff scheme
The STA regrets the extent of the changes made to the FiT scheme, which have resulted in a very
substantial drop in deployment and made forward planning for business under a capped scheme very
difficult. The changes we recommend to the new scheme are discussed in greater detail below:
Adjustment to caps

70MW to be added for the 3q 2016 >50kW caps at no overspend to the existing maximum solar
budget, based on the savings within the scheme to date from degression in the 2 bands.

The mechanism for 50kW+ solar isn’t workable and cannot drive a meaningful rooftop market in
the UK. The volume cap for the >50kW degression band must be increased in 1q17 by a 3 fold
increase, rising to a 5 fold increase by April 2019. See budget impact assessment.

The contingent degression rate (if the quarterly cap is reached) at 10% is too high – it should be
reduced to 5% for all bands. This would not cost the scheme anything, but would reduce the
potential drop in tariff from 40% in a year to 20%.

BEIS must monitor deployment levels for those bands which look like they are failing and allow for
those tariffs to be paused or even increased when required. We suggest assumptions on
percentage of self-consumption and electricity prices are revisited.
Removal of barriers to deployment

The EPC requirement should be changed to match the RHI scheme – the removal of the green deal
for the Renewable Heat Incentive is designed to stimulate the market and the same should be
applied to FiTs. Under a capped scheme there is no longer a concern of ‘over spend’ for the LCF.
Furthermore, the introduction of the requirement to hold an EPC prior to the commissioning date is
an unnecessary new barrier, particularly for new build. Matching the RHI scheme’s requirements
for cavity wall and loft insulation would streamline this administrative process and remove red
tape.

Allow eligibility for extensions to existing FiT installations again – many companies wish to extend
existing projects as they have additional funds available, have become comfortable with the risk
and lower returns, and also their on-site self-consumption has changed. Preventing extensions to
existing projects is an unnecessary barrier and companies should be rewarded, not penalised, for
their early adoption.

When the cap is reached installations should be allowed to continue seamlessly to accredit at the
next available tariff, albeit that their tariff start date will be delayed until the quarter in which they
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STA Policy Asks – Making Feed in Tariffs Work
can be accepted into the scheme. There needs to be a ‘guaranteed eligibility’ for all applications
providing sufficient quarterly caps are maintained to March 2019.

Extend pre-accreditation from 6 months to 12 months to improve decision making for large
projects or portfolio projects

Pre-accreditation should be introduced for the 10-50kW degression band
Administrative changes

The biggest barrier resulting from volume caps is the difficulty this presents installers in accurately
informing prospective customers what tariff they will be eligible for, and therefore what return
they can expect to receive. A requirement should be placed on Ofgem to publish near real-time
information on progress towards quarterly caps, which would go some way towards alleviating
the difficulty in predicting the tariff a project will receive.

For <50kW installations that apply through the MCS database, there is evidence e.g. under new
build, that a significant share of projects do not go on to apply for FiTs, yet they are still recorded in
the data and still count towards the cap. The accounting should be changed such that only
capacity that applies for FiTs counts towards the cap.

Ofgem should be given additional resources to allow the accreditation period under FiTs to be
significantly reduced. In March 2016, Ofgem admitted that there was a backlog of 2,500
installations awaiting full accreditation under Fits.

We ask for BEIS to implement an appropriate and fair process for the six monthly reallocation of
underspend in the FiT budget.
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STA Policy Asks – Making Feed in Tariffs Work
Impact Assessment
Cost impact for one off increase in 3Q16 >50kW cap by 70MW:
We have used the actual deployment of 27MW in 2q16 for the <10kW band, 10MW for the 10-50kW band
and >14.5MW for the >50kW band, causing a 10% degression in the >50kW band only. The net savings
across the solar budget are £3.5k.
Caps using estimates in yellow to 3Q16 and proposed new cap in orange for 3Q16
1Q16
2Q16
3Q16
<10kW
10 50kW
48.4
77.0
16.5
>50kW
Stand
alone
14.1
5
4Q16
1Q17
100.9
51.7
52.8
53.8
54.2
55.9
57
58
59.1
60.1
61.1
25.7
32.8
17.8
18.2
18.6
18.7
19.4
19.8
20.3
20.7
21.1
21.5
14.5
84.9
15.4
15.8
16.2
16.4
17.1
17.6
18
18.5
19
19.4
5
5
5
5
5
5
5
5
5
5
5
5
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
Cost impact of proposed changes – net impact saving £3.5k
By year
1q16
16/17
17/18
18/19
Total
<10kW
£1,040,498
-£988,943
£4,515
£4,524
£60,594
10 - 50kW
£346,694
-£331,269
£1,650
£1,685
£18,760
50 - 250kW
£130,144
-£519,429
£312,136
£309,987
£232,838
250-1000kW
-£30,692
-£182,840
-£23,418
-£22,628
-£259,577
> 1000kW
-£10,041
-£90,386
-£6,125
-£3,587
-£110,139
Stand alone
£0
£25,552
£23,154
£12,223
£60,930
Total
£1,476,604
-£2,087,314
£311,912
£302,204
£3,405
Cost impact for increased caps in 1q17 by a 3 fold increase, rising to a 5 fold increase by April 2019:
The same deployment assumptions have been considered as above. We have increased caps in 1q17 3 fold,
rising by 0.25 per quarter up to a 5 fold increase in 1q19. Net increase in solar budget is £5.8m.
Caps using estimates in yellow to 3Q16 and proposed new caps in orange for 3Q16 to 1q19
1Q16
2Q16
3Q16
<10kW
10 50kW
48.4
77.0
16.5
>50kW
Stand
alone
14.1
5
4Q16
1Q17
100.9
51.7
52.8
53.8
54.2
55.9
57
58
59.1
60.1
61.1
25.7
32.8
17.8
18.2
18.6
18.7
19.4
19.8
20.3
20.7
21.1
21.5
14.5
84.9
5
15.4
5
2Q17
47.4
5
52.7
5
3Q17
57.4
5
4Q17
1Q18
64.1
5
70.4
5
2Q18
76.5
5
3Q18
83.3
5
4Q18
90.3
5
1Q19
97.0
5
5
Cost impact of proposed changes – net impact costing £6.1m
By year
1q16
16/17
17/18
18/19
Total
<10kW
£1,040,498
-£988,943
£4,515
£4,524
£60,594
10 - 50kW
50 250kW
2501000kW
£346,694
-£331,269
£1,650
£1,685
£18,760
£130,144
-£899,350
-£1,678,020
-£2,417,922
-£4,865,148
-£30,692
-£250,295
-£371,585
-£487,006
-£1,139,578
> 1000kW
Stand
alone
-£10,041
-£111,653
-£96,286
-£75,968
-£293,948
£0
£25,552
£23,154
£12,223
£60,930
Total
£1,476,604
-£2,555,957
-£2,116,573
-£2,962,464
-£6,158,391
6