Feed-In Tariffs 1St Review 3Rdconsultationresponse by Feed-In Tariffs Limited

Feed-in Tariffs 1st Review 3rdConsultationResponse by Feed-in Tariffs Limited

November 2011

Dear Renewable Financial Incentives Team,

Feed-in Tariffs Limited has been established to inform prospective beneficiaries about the FITs and to help them participate. Our website receives typically 1,000 visits each working day and had 5,000 visitors on the day your latest consultation was published.

This response is based largely on the feedback we are receiving from prospective FITs participants. We are also encouraging them to submit their own responses to the consultation.

Our response is presented as follows:

(A)Feedback on the premise for your proposalsP 1

(B)Replies to consultation questions using your templateP 4

(A)The premise for your proposals

The overwhelming majority of those who express their views to us believe that:

• The changes are again motivated purely by an arbitraryfixed cap on the scheme, based on the previous flawed government analysis of the uptake of FITs technologies. It is not supported by the legislation under which it was introduced and inconsistent with a price-based mechanism.
• Your action will curtail development in one of the UK’s few growth sectors and lose a golden opportunity for job creation.
• This third (of four) consultation within a 9 month period has already severely undermined confidence in this scheme in particular and the credibility of government policy more generally.
• Your consultation process is not in accordance with the government’s own guidelines.
• This is called Phase I of the Comprehensive Review, but is clearly just another round of emergency measures to slow the take-up of PV.

The ‘spending cap’ of £360m

Paragraphs 29 and 30 of the consultation explain that theseproposals stem fromDECC’s 2010 analysisof the expected uptake of FITsin the PV market. This is despite the flaws in these projections, illustrated in Figure 2and noted by several commentators at the time[1].

You are now seeking to adjust the tariffs to manufacture an outcome which matches this flawed analysis.

If you wish to reduce the success of the FITs to restrict it to a fixed financial cap (which we do not accept), the more logical approach, consistent with the aims of the scheme, would be to reassess any technologies where the tariffs do not give the intended rate of return, and if necessary to reduce the rates of return across the board to achieve a lower take-up rate.

Unlike previous mechanisms such as the Renewables Obligation, which define annual volume targets, the Feed-in Tariffs were devised as a price based mechanism. The principle is that volume-based mechanisms specify the capacity to be delivered and the market will then find the price, whereas tariff mechanisms set the price and the market then finds the volume. Of course in either case the government can potentially adjust the set volume or price levels if the measure is not achieving the required policy objective.

For this reason it is incompatible with a price-based mechanism to further seek to apply a specific financial (effectively a volume) cap.

The original Feed-In Tariff legislation makes no reference to the need to operate within specific volume or financial limits.

Retrospective action

Having confirmed that theGovernment will not act retrospectively, it is disingenuous to suggest that this commitment is fulfilled purely by confirming that:

“The proposed reference date is 6 weeks after the publication date of this consultation. This is consistent with the Government’s commitment that tariff changes will not be made retrospectively for installations already accredited to receive FITs.”

Many projects already in progress cannot realistically achieve accreditation for the tariffs by 12th December 2011 because of the lead times involved[2].

These projects have been initiated in good faith by those seeking to support Government policy based on a regulatory measure and tariffs published to be effective until 31st March 2012. Many of them will have incurred significant investment – typically tens of thousands of pounds in costs are incurred up to a planning application.

The Government made a specific undertaking[3] when it first designed the Feed-In Tariffs that:

“In order to ensure that existing investors may proceed with certainty, any changes to future levels of support will apply only to investments following the review”

To honour this, it must now allow reasonable period to realise projects that have already committed investment as described above.

Consultation process

Your document contained a link to the government’s best practice guidelines[4], but did not, as that document requires, reproduce the seven key criteria.

You seem to be in contravention of criteria 1 and 2, amongst others:

Criterion 1When to consult

Formal consultation should take place at a stage when there is scope to influence the policy outcome.

The proposed ‘reference date’ and the approach taken all indicate that, like the ‘fast-track’ review, this is a done deal, which this consultation is already too late to influence. Your assertion that this is urgent is unmatched by your languor in taking 9 months from the date the review was announced to bring forward this consultation.

Criterion 2Duration of consultation exercises

Consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible.

Clearly this will last for less than eight weeks.

Responses to your specific questions

are attached using your template in the following section.

We may update this response prior to the closing date if we get more substantive feedback from correspondents.

Yours sincerely,

Philip Wolfe

Director, Feed-in Tariffs Limited

C:\Documents and Settings\philip.wolfe\Desktop\FITL1103ConsultationResponse.doc

Comprehensive Review Phase 1:

Consultation on Feed-in Tariffs for Solar PV

Please use the table below as a template to respond to the consultation. It will help us to record and take account of your views.

Also, please provide evidence for your answers and comments where possible.

C:\Documents and Settings\philip.wolfe\Desktop\FITL1103ConsultationResponse.doc

[1]and afterwards, for example the report “On the brink of a bright future? Insights on the UK solar photovoltaic market” by PriceWaterhouseCoopers in June 2010.

[2]The Government is clearly aware of this issue and referred to it under “Treatment of installations under construction during a review” in the RHI design document.

[3]“Feed-in Tariffs Government’s Response to the Summer 2009 Consultation” February 2010 (highlighting not in original)

[4]“Code of Practiceon Consultation” Department of Business, July 2008