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New European solar feed-in-tariff developments


According to a recent Deutsche Bank research report, investors want transparency, longevity and certainty—i.e. “TLC”—in policy regimes to mobilize capital through consistent, secure and predictable, payment mechanisms.
A great variety of renewable energy incentive schemes are in place, ranging across carbon pricing, markets for tradable renewable energy certificates (RECs), reverse auctioning for renewable capacity, tax credits, loan guarantee schemes and government-backed funds. But Deutsche Bank highlights feed-in-tariffs (FiTs) as particularly attractive and low risk from an investors point of view.
Indeed, the mechanism has already proven itself to be an effective way to deliver scale in renewables quickly—just look at Germany, Spain and Italy.
However, if FiTs are poorly conceived, they are likely to go awry. In 2008, the generous Spanish FiT and lower solar panel cost encouraged such a huge volume of solar installations and the government couldn’t afford to keep paying the money out and in September 2008, slashed the FiT by 30 percent, which burned the industry.
As the cleantech industry continues to mature, the financing and scaling of cleantech will be crucial to the sector and create new models and markets.
Italian, German, UK and Israeli governments are all finalising the details of their latest FiT offerings, which are likely to have big implications for the ability of the solar market to get to scale over the next decade.
Here are latest international FiT policy updates:
Italy
Last Monday, the Italian government released the latest draft of a decree which plans to reduce the cuts it previously announced to solar incentives. The decree states that for large solar plants of over 1MW, the proposed tariff as of January 1, 2011, is to be €0.313/kWh, compared with €0.298 /kWh in the previous version. The €0.313/kWh tariff is expected to decline to €0.2642/kWh at the end of 2011. The tariffs are then to fall by 6 percent a year in 2012 and 2013.
Germany
According to Reuters reports citing a parliamentary source, German feed-in tariffs are to be cut 16 percent for most solar photovoltaic installations from 1 July, 2010. The reduced rates would apply to all rooftop solar panel systems, and those built on disused land, such as former army bases. Solar installations on converted arable land, which have been extremely popular in recent years, will see all incentives removed. The proposed cuts are yet to be passed by the cabinet and parliament, but are likely to lead to a boom in the market during the first half of the year as homeowners and businesses rush to take advantage of the scheme before the incentives are cut.
UK
The UK Clean Energy Cashback (feed-in tariff), intended to apply to solar and other local generation, has been finalized, and starts on 1 April 2010. The tariff is expected to deliver a return of 5-8 percent for well-sited installations. It will consist of three elements:  A fixed payment from the electricity supplier for every kilowatt hour (kWh) a system generates. This is called the generation tariff. A guaranteed price for any surplus electricity that not used on site, and exported to the grid. This is called the export tariff and will also be paid by the electricity supplier. It has been set at 3p per kWh. In addition, with power generated on site, sites will need less from the national grid, so power bills will be lower.
Israel
Last week, Israel’s Minister of National Infrastructure (MNI) authorized a new incentive policy for residential and small industrial solar power installations up to 50 kilowatts (kW). Previous reports suggested the FiT was to be set at 1.61 NIS (EUR 0.31) per kWh. According to the authorized quotas, tariffs for residential arrays up to 4kW will be uncapped until December 2014. Similarly, tariffs for industrial installations (15-50kW) installed in periphery, or non-urban areas, also will not be capped. Industrial installations that are not in periphery area or ones placed on public buildings’ roofs, are to be capped to 50MW. And a 30-megawatts (MW) tariff cap has been set for all roof-top systems on public buildings, with an emphasis on educational institutions.
This activity only emphasises the global nature of the cleantech revolution, with multiple regions of the world participating in the explosion of cleantech innovation, government support and investment capital.
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