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Government Continues to Support Renewable Energy

To meet the 2020 15% renewable energy target the Department for Energy & Climate Change (DECC) need to develop new ways of generating renewable energy in all sectors, including electricity and heat. On 20 October 2010, as part of the Spending Review, the Chancellor announced that the proposed Renewable Heat Incentive (RHI) scheme will be now be launched in June 2011 and the existing Feed-in Tariff (FIT) scheme is to continue, although two new elements have been introduced.

Feed-in Tariffs

In April 2010 the Government introduced feed-in tariffs, also known as the clean energy cash-back scheme, to pay people who invest in generating their own green electricity. Following the Chancellor’s report, which continues to support the scheme, the DECC have introduced two new elements. Firstly, in the scheduled 2012 scheme review, the tariff for new participants will be reduced by £40m (10%) for 2014/15. Secondly, and more significantly, the DECC reserves the right to bring forward the review date if the number of installations between now and 2012 is much higher than expected.

Wessex advise those considering the installation of photovoltaic solar panels to therefore install them as soon as possible. Whilst the current rate of 41.3p per unit of electricity generated was always only guaranteed until 31 March 2012, this new announcement is an admission that a rush of people fitting solar panels will lead to the rate being cut much earlier than 31 March 2012.

It is important to clarify that once you have signed up to the scheme the feed-in tariff is index linked and guaranteed for 25 years. Income and savings at current rates ensure the cost of an average installation is normally repaid in around 10 years.

Renewable Heat Incentive

On 1st February 2010, the DECC published a consultation on the proposed design of the Renewable Heat Incentive (RHI) scheme. The consultation sought views on a number of aspects of the proposed scheme, including tariff levels. Following the Spending Review the Government remains committed to the ambition of moving from 1% to 12% of all heat generated from a renewable source by 2020. The introduction of the RHI scheme will represent over £850m of investment over the Spending Review period.

The DECC will now consider further the operation of the scheme including RHI tariffs and technologies and expect to speak to stakeholders in the next few weeks ahead of an announcement on the detailed design of the scheme before the end of the year.

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