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Jones Lang LaSalle Houseview - Feed-in Tariff Consultation and the Future of Renewables in the UK

London, 25th March 2011 – The original Feed-in Tariff Scheme (FIT) for the England, Scotland and Wales was launched on 1 April 2010. The scheme was set-up as an incremental tariff system, based on system size, with a 5MW cap.   The commercial real estate industry saw this programme, and the sizes of the systems it could host, as an opportunity to utilise their roof space in support of the country’s solar goals and a way to achieve their own sustainability objectives. 
On 18 March 2011 a consultation was launched for a fast track review of schemes larger than 50kW. The consultation stated that reviewing the scheme now provides a better chance of delivering sustainable growth, rather than a boom and bust situation.
However, until the final consultation results are published, and if they remain as presented, instead of providing certainty, the solar market in general has come to a screeching halt due the lack of economic viability of solar systems under the proposed tariffs. This means that many of the investors, and commercial real estate solar hosts who were considering rooftop solar systems greater than 150kW (or roughly 3,000 square meters) for their sites, including shopping centres and business parks, are now putting their projects on hold and will ultimately terminate them if the proposed scheme is accepted.
Although this consultation is theoretically in line with changes being made to FITs for PV elsewhere in Europe, we must remember, 1) the tariff rate reductions are greater than anywhere else, 2) those markets have had FITs in place for five to 10 years and, 3) they have included many solar installations well over 20MW.  After achieving overwhelming success, these countries are now implementing reductions in their FIT rates that coincide with lowering system costs.

The intention is that these changes will take effect from 1 August 2011 and apply to England, Scotland and Wales. The Government will not act retrospectively and any changes to generation tariffs implemented as a result of the fast-track review will only affect new entrants into the FITs scheme. Installations which are already accredited for FITs at the time the changes come into force will not be affected.
Lee Siddons, Head of Renewable Energy Solutions at Jones Lang LaSalle EMEA, said; “I am disappointed that such a drastic change came in now, it would have been more appropriate if the Feed-in Tariff scheme looked like this in the first instance, which would have allowed for the renewables market to plan accordingly.“
Erin Karsten, Head of UK Renewable Energy Solutions at Jones Lang LaSalle, added; “While the government aims are laudable and the intent to make renewables accessible to everyone should be addressed, we must remember that a significant share of the UK’s overall energy consumption and the major contributors to greenhouse gases are commercial buildings, not the residential market. If we want to see a significant impact in carbon reduction we need an incentive scheme that is reasonably attractive to investors, as well as small-business and homeowners. Without the feed-in tariff, not just solar but other technologies too, are just not financially viable to install, which is the reason that feed-in tariffs were created.”
Dave Gralnik, Head of Global Renewable Energy Solutions at Jones Lang LaSalle, concluded; “The knee jerk reaction by the UK government to council applications for large sized solar systems has caused a loss of confidence by the renewables industry in the future of the country’s solar market and other renewables based FITs.  Furthermore, the proposed Feed in Tariff adjustment has discouraged many of our clients, and if the scheme continues as presented will dramatically reduce the participation of the real estate industry as solar system hosts.”