Changes to financial support for Solar PV

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21 July saw a flurry of solar PV projects trying to submit planning applications and get land agreements in place by 22 July, as rumours of proposals to close the RO to new solar PV capacity at 5MW began to spread.

When the Government's consultation paper on controlling the costs of solar PV was published on 22 July, the proposals also included removal of grandfathering for solar PV projects in England and Wales with an accreditation date from 23 July 2015 onwards in an effort to avoid potential over compensation of further solar PV deployment before the early RO closure.

The results of this consultation have now been published, with no great surprises. The Government acknowledges that a significant majority of those who responded, objected to the proposed measures and questioned the rationale without evidence of how the LCF overspend was made up. The Government predicts that without any intervention in the subsidies scheme there will be 1.2 to 2 GW solar PV deployment in 2015/2016 and 2016/2017, which is said would cost between £40m and £100m per year for up to 20 years. However, this has led to the following decisions:

  • From 1 April 2016, the RO across Great Britain will be closed to new solar PV generating stations at 5MW and below and to additions to existing generating stations which do not increase the installed capacity to 5MW. Grace periods will be given in line with those provided for solar PV projects above 5 MW where projects can demonstrate:
    • preliminary accreditation;
    • the required evidence that significant financial commitments were made on or before 22 July 2015; or
    • the required evidence that the project has been affected by grid delay outside the developer's control.

There will be no exemption for community of civic projects, nor an extended grace period, as the Government considers that this would not be consistent with its cost control objective.

  • Grandfathering will be removed for projects in England and Wales at 5MW and below with an accreditation date on or after 23 July 2015. 
    • An exemption will be provided where it can be demonstrated that a significant financial commitment was made in respect of a project on or before 22 July 2015, with the same eligibility criteria as will apply to the RO grace period.
    • Projects qualifying for this exemption will also benefit from an exception from the proposed banding review reduction in support and so will receive the current rate for 2016/2017.

Although the Government have said that it anticipates that the number of projects which will be affected by the withdrawal of grandfathering will be small, the resulting uncertainty in the industry is widely expected to damage investor confidence in UK infrastructure projects as a whole. Early comments suggest it might not be as bad as expected, so we will see what 2016 brings.

Click here to view the Government response to consultation on changes to financial support for solar PV.

Also published today:

  • Review of the FITS tariffs - it will be kept open past January 2016 with a 64% decrease in the revised tariffs. Click here
  • A consultation on a technology-specific banding review for solar PV in England and Wales, with the aim of implementing any changes by 1 June 2016.

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