UK FIT changes: Too much too soon
March 13, 2012
The proposals contained in the new UK Feed In Tariff (FIT) consultation from DECC are set to cut FIT payments on small wind turbines by 25%. This will wipe out the differential between the typical farm wind turbine and those with up to ten times their generating capacity, and will damage the cause of true “distributed” power generation.
While the farm scale wind turbines sector has shown significant uptake, movement towards real cost reduction and creation of local employment. It almost looks as if the government is punishing the small wind category for this success.
DECC’s proposals are also set to disadvantage rural enterprises investing in small wind turbines to service their energy requirements on site. These smaller installations are delivering the vision of true ‘distributed’ generation:
- Electricity being generated where it is used; for consumption by individual households and small, often rural, business
- The turbines are small enough to get planning relatively quickly and be bought by ‘normal’ owners; so they do not normally involve developers, or huge investment funds.
FIT levels can be the difference between going ahead with an investment or not.
Too much too soon
The proposed level of the cut in the FIT for small wind turbines of some 25% from one month to the next is extreme and is a far cry from the gradual degression presented by the government and previously understood by manufacturers developing in the small wind segment.
The DECC position is partly predicated on the idea that - as in the case of solar PV - wind turbine production costs are falling as volumes have greatly increased. For small wind this is not yet the case. There is some movement towards cost reductions; however the technology itself is only a part of the overall installation and servicing process:
- Material costs such as grid cables, foundation materials, and steel are rising as are development costs for certification, planning and grid connection
- Small wind turbines require regular service, unlike solar PV. Training and establishing a service network across the UK takes time and is costly. Only when there are sufficient turbines on the ground to service is there an opportunity for significant cost savings which can reach the customer. This stage has not been reached.
The proposals are unfair to small wind turbines
The economics of wind turbines relate to the scale of the machine: physically larger machines “see” a better wind resource and sweep more air. This fact was acknowledged in the existing banding arrangement. The removal of the 15kW banding and the proposed introduction of tariffs at a flat rate from 1.5-100kW favours the larger machines:
- Although the new proposals retain a substantial FIT differential (9.5 vs 21 p/kWh) between a 1000kW and a 100kW turbine -a ratio of 10 in terms of kW rating, this differential is lost at the smaller end as the 100kW turbine gets the same 21p FIT as a 10 kW turbine
- Smaller wind turbines also need costly MCS certification whereas this is not required for larger units
We need to retain the 1.5-15kW band to provide a differential; indeed it would be better to have several banding levels to acknowledge the relative advantage of size to project economics. If it is not possible to increase the highest FIT rate by 2-3p, then at least keep the 15kW band intact and reduce the FIT above that by say 2p. If we don’t, we will create a difficult competitive position for a successful category of products with a growing population of users across the UK rural scene.
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