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The utter farce of the new FiT scheme

The new cap and queue FIT system - caps exceeded in one day

Ofgem have announced that three of the new deployment caps have been reached within one day of accreditations being open for the new Feed-in Tariff (FIT) scheme.

Regen issued an update in January 2016 on how the new FIT cap and queue system works here. The full Ofgem release can be found here.

The cap for deployment has been reached in the following bands:
stand alone solar PV (solar farms)
medium (50-100 kW) and large (100 - 1500 kW) wind
all Anaerobic Digestion (AD).
An 10 per cent degression (tariff reduction) for the above bands will be applied in the next quarter starting on 1 April 2016. This is due to the quarterly deployment caps being reached (in one case within 15 minutes).

The tables below show our estimate of the generation tariff changes that have been triggered from one day of the new scheme accrediting installations (Table 1) and an overview of the deployment bands with progress against caps (Table 2).
Table 1: Estimate of new tariff levels for Q2 including default degression (automatic) and contingent degression (based on deployment and caps). The tariff rate for AD is more uncertain as a consultation on future tariff levels is due in 'early 2016', which means no default degression rates have been published.
See the full list of current tariffs here.

Table 2: This is a table of the deployment bands from Ofgem that was accurate at midnight on 9 February. We have added the percentage of the cap that has been deployed. Those bands that have reached their cap are in orange and those that we would consider at risk of reaching the cap are in yellow.

The new quarterly cap system opened at 00:00 on 8 February 2016 following a 'pause' of accreditations to the FIT scheme from the 15 January 2016. The system sets a limit on the amount of capacity that can be installed in each quarter. If the cap is reached (see table of caps here), no further installations are eligible to receive the tariff rate available in that tariff period and a degression of 10 per cent is applied. DECC state in their FIT consultation response that applications will have, ‘no guarantee of any support until they qualify under a cap'.

What isn't obvious is that the amount of capacity that has applied will result in a queue of schemes in some bands which will take several quarters to gain accreditation. These schemes could receive a much lower tariff following repeated 10% degressions, in addition to the guaranteed default degressions.

For instance 21.73 MW of wind (100kW - 1.5MW) capacity has applied to the new FIT scheme. The first cap of 6.8 MW for Q1, second cap of 6.7 MW for Q2, and third cap of 6.6 MW, have been reached in one day. Following successive 10 per cent degressions and automatic degressions (1.2 per cent for 100kW to 1.5MW band) this would leave a rate of 3.87 p/kWh for Q4 – compared to the 5.46 p/kWh available in Q1. As an applicant your position in the queue will determine if you get the generation tariff for Q1, 2, 3 or 4. If you are a new applicant to this band you now know that you will have to wait till at least Q4 - 1 October to 31 December 2016 and accept a generation tariff of 3.87 p/kWh (at the most).
Impact of changes
This first data release gives an insight into how the market is responding to the new system and how the caps work in practice.

Applying to the new FIT scheme is like queuing for entry to an event blindfolded. Parts of the queue gain entry every 25 minutes (quarterly cap). Those earlier in the queue get a better seat (a higher generation tariff). However, you don't know how long it will take to get in as you don't know how big the queue is. Clearly this makes the sector very difficult to predict and finance.

New community energy schemes will need to maximise other income streams (apart from the generation tariff) and lower costs. Regen SW is committed to supporting the community energy sector find new business models in this challenging climate. You can access the slides from our recent New Models for community energy in Bath - here.

We will be publishing a series of 'Pathway to Parity' papers over 2016 and our Smart Energy Marketplace event on 17 March 2016 in Exeter. Agenda and booking details of which can be found HERE.

In the meantime please contact me on (01392) 494399 if you have any questions.
Warmest regards,

Olly Frankland
Project manager
‘Delivering sustainable energy’

T: 01392 494 399 | W: www.regensw.co.uk | E: ofrankland@regensw.co.uk

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