UK Government Announces Further Shake-up to RO and FIT Regime for Solar PV

UK Energy Alert | July.22.2015

​Following the closure of the RO regime to new solar ground mounted projects with a capacity of more than 5MW which were commissioned after 31 March 2015, the government has today announced a further shake-up of the subsidy regime for Solar PV. These changes will predominantly affect ground-mounted solar PV projects with a capacity of 5MW or less which have not been commissioned on or prior to 31 March 2016, further evidencing a potential policy shift towards roof-mounted solar projects.

Through their consultation (Consultation) published today, the Department for Energy and Climate Change (DECC) is proposing to amend the current subsidy regime as follows:

Closure of the RO

DECC are proposing to close the RO scheme across England and Wales to projects with a capacity of 5MW or less and additional capacity added to an accredited project up to 5MW from 1 April 2016. Where a project is not commissioned prior to 1 April 2016, or additional capacity is added to an accredited project of less than 5MW after 31 March 2016, it will only be eligible for ROCs where it satisfies similar grace period requirements to those introduced in respect of the closure of the large scale regime, being:

    a. where the project has been granted preliminary accreditation prior to 22 July 2015 and the full application

    for accreditation is submitted on or prior to 31 March 2017;

    b. where evidence is provided to Ofgem that a significant financial investment has been made in the project

    on or before 22 July 2015 in the form of:

         i. a valid connection offer and acceptance dated on or prior to 22 July 2015;

         ii. a director's certificate by the developer or proposed operator of the station confirming ownership of

         the land, lease of the land, an option to lease or purchase the land, an agreement to lease the land or

         that the developer or a connected person is a party to an exclusivity agreement in relation to the land

         as of and no later than 22 July 2015; and

         iii. confirmation that a planning application had been received by the relevant planning authority in

         respect of the project on or prior to 22 July 2015 or a declaration that planning permission is not required,

         which is submitted to Ofgem with an application for accreditation on or prior to 31 March 2017; or

    c. where evidence is provided that delays in the connection of the project were caused by factors outside of

    the developer's control and submitted to Ofgem with an application for accreditation on or prior to 31

    March 2017.

Removal of Grandfathering

DECC have further proposed to remove current investment safeguards provided through grandfathering (whereby the number of ROCs/MWh a project is eligible for remains at the level it was at upon accreditation for the lifetime of its support under the scheme) for those sub-5MW projects which are not accredited as at 22 July 2015, unless they qualify for the significant financial investment grace period set out above.

This will prove hugely detrimental for those developers who missed the 30 June 2015 cut off for the £61.60kWh FIT Tariff but who have not yet obtained the relevant project rights (connection offer, planning permission and land rights) in order to satisfy the significant investment grace period criteria and may significantly limit their ability to get investment to build out proposed projects.

Banding Reviews

DECC will also be publishing a further consultation, subject to the Consultation, relating to proposed bandings for new solar PV projects of 5MW and below.

The Consultation closes on 2 September 2015. A copy of the Consultation can be found here.

Effect on the Feed in Tariff (FiT)

The Government is simultaneously consulting on the removal of pre-accreditation for FiTs with the consultation period open for comments from 22 July – 19 August 2015. This further reduces the certainty as to the tariff rate a project will receive and requires a developer to take this risk post-construction and this change will affect community projects hoping to accredit with FiTs. Nothing can be said with any certainty at this point in time in terms of the subsequent changes that may be proposed in respect of FiT degression. The removal of the RO and grandfathering means that more solar projects with a capacity of 5MW or less will deploy under FiTs and will cause hyper degression of tariffs for projects with a tariff date relating to these deployment periods. It remains to be seen how this will play out in practice and what further changes the government will propose in its consultation on FiTs which will be published later in the summer.