If you are planning on putting photovoltaic (PV) cells on your roofs to benefit from the Government’s Feed-in Tariff, you will need to finish the project before 12 December in order to benefit from the current rates.

After that, the Government proposes to cut the rates by up to 51%. The new rates will start in April next year but will apply to all units finished after 12 December. The move follows a cut in tariff for the largest units in August by as much as 70%.

There are also proposals to cut the Feed-in rate still further if you have PV cells on more than one site. The suggestion is that you will receive 20% less than the standard rate.

Existing installations will continue to receive their current rate… for now. Some in the stone industry are worrying that the rates could be cut retrospectively in future, there being a certain scepticism regarding Government guarantees.

Thanks to the Feed-in rate, several stone companies have been encouraged to install electricity generation plant on their premises. They were promised the Feed-in rate for the next 20 years (the expected low-maintenance lifetime of PV cells) in many cases, giving a typical return on investment of 8-12 years.

The Government wanted to encourage small scale generation of electricity to make up for a predicted shortfall in supply that could be seen as early as 2025. It was cheaper than starting to build new power stations now, which might not be commissioned in time to meet the expected demand in any case. Moves are also being made to reduce energy demand by making buildings more energy efficient.

But the take-up of PV cells has been greater than had been anticipated, leading to more companies entering the market and rapid development of the cells and manufacturing methods that have brought down the price of them.

The Government says that has led to the need for urgent action “to put the solar industry on a steadier, clearer and sustainable growth path, avoid boom and bust and protect the wider Feed-in Tariff scheme (FITs)”.

The proposals to cut the Feed-in Tariff are subject to consultation, but few are anticipating any changes in the proposals as a result. As an example of the cuts expected, schemes up to 4kW in size will, after 12 December, receive 21p/kWh from the FITs. They previously received 43.3p/kWh.

Climate Change & Energy Minister Greg Barker said when announcing the proposals on 31 October: “My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust.

“The plummeting costs of solar means we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme.

“Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year.

“Our proposal for an energy efficiency requirement, as well as the launch of the Green Deal next autumn, creates a massive opportunity for these firms to use their expertise to get a foothold in this exciting new market.

“People who are now thinking of installing solar PV need to do so with their eyes wide open and I’d encourage them to call the Energy Saving Trust for the latest advice.”

The Government says the cost of an average domestic PV installation has fallen by at least 30% since the start of the scheme – from around £13,000 in April 2010 to £9,000 now.

The Government’s excuse for cutting the Feed-in Tariff is that it is electricity consumers who pay for it. If the Government took no action, by 2014-15 FITs for solar PV would be costing consumers £980million a year, adding around £26 (at 2010 prices) to the average annual domestic electricity bill by 2020. However, even with the proposed cuts in the feed-in rate the scheme will add an extra £23 to the average consumer bill. Many consumers might consider an extra £3 a year a worthwhile price to pay to keep the FITs where it is.

However, the Government also wants to stem the surge in PV cell installation. It says there were more than 16,000 new solar PV installations in September alone – nearly double the number in June. There are nearly three times more PV cells now installed than had been expected. There are now more than 100,000 installations with more than 400MW of capacity.

The eligibility date of 12 December to receive the existing FITs rate is based on a project being commissioned (in working order) and having its request for accreditation received by a FITs licensee (schemes up to 50kW) or Ofgem (more than 50kW).

The Government says the new tariffs will offer a rate of return of around 4.5% to 5% index linked and tax free (for domestic installations), broadly comparable to that intended when the scheme was set up. The tariffs are broadly comparable to those offered in Germany, which has also recently reduced its tariffs.

The consultation doicument also proposes:

• a new energy efficiency requirement that would mean from 1 April 2012 a property would have to reach a certain level of energy efficiency to receive the proposed new tariff rates. This could include reaching an Energy Performance Certificate level of ‘C’ or taking up all the measures potentially eligible for Green Deal finance, depending on the outcome of the consultation. As a transitional arrangement, installations with eligibility dates between 1 April 2012 and 31 March 2013 would have 12 months from the eligibility date to comply with the energy efficiency requirement.
• new multi-installation tariff rates for aggregated solar PV schemes, ie where a single individual or organisation owns or receives FITs payments from more than one PV installation, located on different sites. The new tariff rates would apply to all new PV installations that are part of an aggregated PV scheme and have an eligibility date on or after 1 April 2012. The new tariffs are set at 80% of the standard tariffs for individual installations.

The Government will also, as part of its review into the FITs scheme, consider whether more could be done to enable genuine community projects to be able to benefit from FITs and whether, for example, a definition of 'community scheme' is required and, if so, what it should be.

To go to the website of the Department of Energy & Climate Change to read more about the proposed changes, click here.