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Cut Feed-in Tariff costs or lose the scheme, says DECC

The Department of Energy & Climate Change (DECC) is threatening to pull Feed-in Tariffs (FiTs) for new schemes within months if the renewables sector considers proposed cuts to be unsustainable.

The department has launched a consultation that proposes a more stringent degression mechanism and a cap on new FiTs expenditure of £75m-£100m by 2018-19 after which the scheme will be closed.

DECC says that if such measures cannot put the scheme on “an affordable and sustainable footing” then generation tariffs for new applicants would end, probably from January 2016.

As well as cutting costs, the take-up of the existing scheme is seen as a success.

In 2010, it was estimated that 750,000 installations would be achived by 2020 but, by the end of July 2015, that figure was already at more than 730,000.

A four-week consultation launched in July on the possible removal of pre-accreditation for FiTs caused concern in the anaerobic digestion (AD) industry that investors would be unwilling to provide financial backing without the assurances that the scheme provides.

Charlotte Morton, chief executive of the Anaerobic Digestion & Bioresources Association, said: “The FiT consultation proposes restricting support for AD to just 17 new plants next year – which would effectively mean an 80% cut in investment for an industry which deployed 89 clean baseload power plants in 2014.

“This should be the time to build on our foundations, not dismantle them. Support of AD offers a fantastic return on the taxpayer’s investment, providing baseload electricity to help keep the lights on, offering cost-effective greenhouse gas reductions and growing a domestic supply chain which can export to the world.”

But Richard Warren, senior policy adviser at EEF, the manufacturers’ organisation, said: “DECC’s number one priority has to be delivering emissions reduction at the least cost to consumers and FiT scheme is palpably incapable of doing this at present. 

“Even with significant cost reductions achieved in recent years, the FiTs scheme reduced carbon at a woefully inadequate rate of £380/tonne last year almost double even that of offshore wind at around £200/tonne. A review is long overdue.”

Joss Blamire, senior policy manager at Scottish Renewables, which represents more than 300 green energy businesses, said: “The proposals in the comprehensive FiT review are, quite simply, terrible news for homeowners, businesses, communities and those local authorities which have plans in place to develop renewable energy schemes.

“FiT-scale renewables have allowed both rural and urban businesses to grow by taking control of their own energy use and insulating them from the volatile, uncertain costs of imported fossil fuels. Reducing that support so far, and so quickly, could be hugely damaging.”

Juliet Davenport, chief executive of Good Energy, one of the largest FiT administrators, said: “The FiT has transformed the way the UK generates its power over the last 3 years, with over 22% of the UK’s power coming from renewables in the early part of 2015. We hope the government will re-think the value that renewables bring to the market.”

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