UK announces Feed in Tariff program for solar energy development

By Chad Farrell of Encore Redevelopment, February 2010

The Energy and Climate Change Secretary of the United Kingdom announced the country's first feed-in tariff program.  Solar projects of up to 5MW will receive the equivalent of US$0.47 per kWh for 25 years.  This tariff has been set for projects that begin producing during 2010 and 2011.  Projects that begin producing in 2012 will receive US$0.43 per kWh for the same 25 year period. For comparison, the current German and Spanish feed-in tariffs are the equivalent of US$0.44 and US$0.43 per kWh respectively.

Ash Sharma, Renewable Energy Research Director for the market research firm IMS Research, commented, “The announcement presents an even higher feed-in rate than was originally proposed. This is likely to generate a significant PV market in the UK, though it will take some time to get traction due to the need for all installers to be registered under the scheme. The UK has similar irradiation levels as Germany and without a FIT just 5 MW of new PV power was installed in the UK in 2009. However, the introduction of this FIT could lead to 250 MW of new PV capacity being installed in 2011.”

Germany and Spain have together accounted for over 60% of the global market for solar photovoltaic (PV) energy systems since 2007.  As an example, German installations amounted to 1,680MW in 2008 while installations in Spain added up to 2,460MW of new installations.  For comparison, the installed base of PV systems in the US is currently only slightly higher than 1,000MW.  

The UK's feed-in tariff regime essentially matches the current regime offered by both Spain and Germany and should more than compensate for the marginal downward revisions to prospective tariffs in Germany and Spain over the next two years. Even if the UK market adds a fraction of what has been built in Germany each year, it would provide a significant increase in demand for PV systems worldwide, resulting in upward pricing pressures for systems built in the US and elsewhere around the world.