Subject to some limited exceptions (including a time-limited extension for micro-solar PV and wind and a grace period for hydro and anaerobic digestion and for solar PV and wind with a capacity over 50kW), the closure extends to the FiT subsidies for both generating and exporting electricity. This means there will now be no access to direct subsidies for new small-scale low-carbon electricity generation.
The government did encounter some significant opposition to this move in their consultation on the issue. One particular concern noted in the consultation responses was the lack of routes to market for small-scale generators which would be caused if the FiT scheme were closed. The government’s response in December 2018 promised “specific proposals for future arrangements in due course”.
The solution now proposed by the government takes the form of a Smart Export Guarantee (SEG). The SEG, set out in a separate consultation which ran from January to March 2019, would see the government legislate for electricity suppliers with more than 250,000 customers to remunerate small-scale low-carbon generators for the electricity they export to the grid. Smaller suppliers would be able to opt in if they wished. The suppliers would be obliged to offer small-scale generators at least one export tariff per kWh, but with suppliers able to determine what price to offer and the length of the contract.
The government’s stated aim would be to keep the route to market open for small-scale generators, whilst also moving towards a “market-based” and “cost-reflective” pricing model. Their longer term aim, as set out in the consultation, is to remove government intervention from small-scale low-carbon electricity generation in its entirety (furthering previous policy aimed at onshore wind, which has already seen the closure of the “Renewables Obligation” support for larger windfarms).
The end of the FiT scheme marks a stage of that process and a SEG would clearly represent a significant shift for those looking to invest in small-scale generation. What will have disappointed the industry is the period of uncertainty effectively created by the closure of the FiT scheme without a successor scheme or clear alternative ready to launch. From homeowners and community bodies considering installing solar PV, to farmers and landowners looking at installing wind turbines and anaerobic digesters, would-be participants will be questioning if and when to go ahead and the risks to businesses in the sector and of difficulties in financing projects are not insignificant.
That said, uncertainty was rife throughout the life of the FiT scheme. Through repeated and significant reviews by successive governments, and in particular some severe tariff cuts, the FiT scheme still succeeded in stimulating small-scale renewable electricity generation. Some would argue that is what a subsidy for an emerging technology is for. With the differing policies on energy as between the UK and Scottish Governments (but with energy being reserved to Westminster), particularly in the ongoing context of (dare I mention it) Brexit and SNP cogitations on another independence referendum, it seems unlikely we will see an end to uncertainty soon. There will no doubt be a requirement before long to power a new era of electric motoring and Scotland will continue to enjoy a disproportionate share within the UK of natural resources suitable for renewable energy generation – one would assume renewables will necessarily continue to form part of the energy mix north of the border.
Alistair Rushworth is a Partner at Turcan Connell.