The U.K. government will cut prices for solar energy beginning in August and reduce subsidies every quarter as part of a new framework that aims to maintain growth for the industry while keeping a lid on electricity costs.
The reductions of 20 percent to 24 percent apply to feed-in tariffs, or fixed premium rates for solar power, beginning Aug. 1, the Department of Energy and Climate Change said in a statement in London today. Further reductions of 3 percent to 28 percent will be applied every three months, depending on how how many installations are proposed.
The reductions come into force a month later than planned and are lower than the ones proposed in February. That plan triggered a backlash from companies including Good Energy Group Plc, which said the speed of the reductions would cost jobs.
“Today starts a new and exciting chapter for the solar industry,” Energy Minister Greg Barker said. “The sector has been through a difficult time, adjusting to the reality of sharply falling costs. The reforms we are introducing provide a strong, sustainable foundation for growth.”
The tariffs for projects completed after Aug 1 will be between 16 pence (25 cents) a kilowatt hour for domestic installations and 7.1 pence for solar plants with more than 250 kilowatts.
The new rules match efforts in Germany and Italy to control a surge in solar installations after Chinese companies led by Suntech Power Holdings Co. boosted production of panels, pushing down prices enough to make more projects feasible.
The measures may support around 800 megawatts to 1,000 megawatts of installations a year until 2015, which is more than the original feed-in tariff plan anticipated for the entire period, the Solar Trade Association trade group said in a statement. More than 1,100 megawatts are currently installed in the country.
“This now provides the industry with the security of guaranteed tariffs to 2015 allowing it to build for the future,” said Paul Barwell, chief executive officer of the association. “Even when tariffs are adjusted on Aug. 1, solar will still offer attractive returns to customers.”
The government will cut the tariff for domestic projects almost 24 percent to 16 pence a kilowatt hour and the export tariff will be increased to 4.5 pence a kilowatt hour.
The cuts are the fourth reduction since the feed-in tariff program started in April 2010. In April, the government reduced rates for future projects by as much as 55 percent as it boosted its budget for the tariffs by about 2 1/2 times to at least 2.2 billion pounds until April 2015.
Tariffs for new projects will be reduced to 20 years from 25 years, while average returns remain at 6 percent to 8 percent.
The new rate for projects where one company or owner has more than 25 solar installations will be 90 percent of the full rate, compared to 80 percent in the proposal.