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How the confirmed change to subsidies will affect solar on schools

The government announced today the results of its consultation on renewable energy subsidies. Following huge amounts of campaigning from 10:10 and Greenpeace in addition to thousands of letters with feedback and support for renewables, the government has reconsidered the tariffs they will pay.


From a school’s perspective the results are mixed. On the one hand subsidies will be about 1p more per kWh for systems up to 50kW. This results in about £250 of additional subsidy per year for a typical 30kW system on a school. It means slightly more schools will be able to have a ‘free’ system than otherwise, but it does not really impact the level of savings a school will make in the short term. For larger systems the increase from 2.64 to 2.70 is virtually immaterial.

Proposed and final FIT subsidies
Tariffs [p/kWh]
Installed capacity
Consultation tariffs
New tariffs (Jan 2016)
PV
< 10 kW
1.63
4.39
10 - 50 kW
3.69
4.59
50 - 250 kW
2.64
2.70
250 - 1000 kW
2.28
2.27

1000 kW
1.03
0.87
Stand alone
1.03
0.87

The largest increase (but also the largest proposed decrease) applies to residential systems under 10kW. Here the subsidies are nearly 3 times higher although still half what they are currently. This reduction in the proposed cut could be a problem from a schools perspective, because the government is going to implement caps on total expenditure and private households are now going to take up a large part of that budget. This budget is £75-100m per year by 2018, but as this is hard to visualize, they have split the budget by quarter, technology and size and it is clear they expect the bulk of the budget to be used on residential roofs.

Table with breakdown of budgets per quarter

2016
2017
2018
2019
Maximum Deployment (MW)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
PV
< 10 kW
48.4
49.6
50.6
51.7
52.8
53.8
54.2
55.9
57.0
58.0
59.1
60.1
61.1
10 - 50 kW
16.5
17.0
17.4
17.8
18.2
18.6
18.7
19.4
19.8
20.3
20.7
21.1
21.5

50 kW
14.1
14.5
14.9
15.4
15.8
16.2
16.4
17.1
17.6
18.0
18.5
19.0
19.4
Standalone
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0

Looking at the table it is clear that the caps effectively limit deployments to under 400 MW of solar a year. About 1/5 of the installations in 2015 in the UK. In comparison Germany is still installing 5 times that amount (2GW) and China nearly 20 times. (8-10GW) each year.

To understand what this means to schools, you only need to look at the next table. IF Schools used up the entire budget in the 10-50kW category, it limits it to just over 2000 schools a year. As it is unlikely that Schools will be the only buildings installing solar in this category, the actual number will be far lower. Possibly only 100-200 schools a year.

Estimated number of systems per quarter per cap

2016
2017
2018
2019
Estimated number of installations
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
PV
< 10 kW
15330
15710
16050
16380
16720
17060
17170
17720
18060
18390
18710
19040
19360
10 - 50 kW
500
510
520
530
550
560
560
580
600
610
620
630
650

50 kW
70
70
70
70
80
80
80
80
80
90
90
90
90
Standalone
2
2
2
2
2
2
2
2
2
2
2
2
2

Finally the government has confirmed that the old subsidy rates will only apply to new systems connected before 15th January and that applications between the 16th January and 8th February will have to wait until the new rates are implemented.

The government has not changed anything else, apart from the rules around pre-accreditation. Pre-accreditation allows larger projects to secure the subsidy against future cuts whilst the projects are completed. Pre-accreditation was stopped in October of this year. Following the consultation it will be re-introduced from 8 February 2016. As before, it will be available for solar projects over 50kW, but pre-accreditation now only guarantees the rate paid, not when/if it will be paid as this will still be subject to the quarterly caps.

So for schools installing solar systems greater than 50kW they will have 6 months from date of pre-accreditation to complete the project and thus ensure that the rate they are paid will not change in that time, BUT if by the time they apply, the caps are fully utilized, they will have to wait in line until the next quarter.

The government considered changing the rules on export metering, but has thankfully concluded that deemed export will continue for systems up to 30kW given the relatively high costs of implementation. This is good news as currently the economics of a 30kW system on reasonably large schools work because they receive an additional export tariff of just over 4p for 50% of the energy generated, even if they actually used all of it. In reality larger schools will use 60%-90% of the energy generated in any given year.

Conclusion:

Whilst it is encouraging to see that the government has listened and adjusted the subsidies accordingly, on balance we do not think it is an improvement from the original proposed cuts from a school’s perspective. The small increase in the categories relevant to schools is not really material, although it could mean slightly more schools can get funding for their solar panels and thus install solar without investing themselves.

On the other hand the introduction of caps could severely limit the number of schools able to install solar at all, if all the subsidies are used up by businesses installing on their own roofs. What will probably happen is that schools that push on with their solar projects in the next year to 18 months should get them done, but schools that wait are likely to get excluded once the subsidies run out.