UK Softens Solar Supports Cuts

Feed-in-Tariff for solar up to 10 KW at 4.39 p/KWh; tariff spending capped at 100 mln pounds a year.

Britain reduced financial support for domestic-scale solar power by less than expected on Thursday but went ahead with other cost-saving measures on renewables subsidies as expected.

The government cut the tariff for domestic-scale solar up to 10 kilowatts in capacity, such as rooftop solar photovoltaic (PV) installations, to 4.39 pence per kilowatt hour, it said in a statement.

Under the Feed-in-Tariff scheme, households, businesses or farms which install low-carbon energy sources such as solar panels or small wind turbines are paid for the electricity they generate and unused energy can be sold to electricity suppliers.

Solar firms had been expecting a much steeper cut to 1.63 p/KWh, which was proposed in a government consultation earlier this year.

The companies said a cut of that magnitude would scare off investors and argued that a gradual decline in the subsidies would be better for the industry.

Under the old tariffs, solar power up to 4 kilowatts in capacity was paid at 12.47 pence per kilowatt hour and for 4-50 kilowatts it was 11.30 pence.

On Thursday, the government also capped spending on the Feed-in-Tariff (FiT) scheme at a maximum 100 million pounds ($149 million) a year for new installations from February next year to April 2019.

The scheme was introduced in 2010 to encourage the deployment of renewable energy in Britain.

As expected, the government confirmed it would close another of its subsidy schemes, the so-called Renewable Obligation, two years earlier than planned to new solar PV capacity of 5 megawatts and below from next April.

It said it would introduce a "grace period" for those developers who made financial commitments on or before July 22 this year and those who experience delays beyond their control in connecting to the electricity grid.

"We have to get the balance right and I am clear that subsidies should be temporary, not part of a permanent business model. When the cost of technologies come down, so should the consumer-funded support," said Amber Rudd, Secretary of State for Energy and Climate Change.

Britain's Conservative government has been reining in spending on all renewables subsidies since it took power in May.

Figures published by the Department of Energy and Climate Change (DECC) showed the cost of the subsidies could reach 9.1 billion pounds a year by the 2020/21 tax year compared with a proposed budget of 7.6 billion.

Thursday's announcements would reduce the overspend by 500 to 600 million pounds, the government said.

Reporting by Nina Chestney