The Department of Energy and Climate Change (DECC) has confirmed that the Renewables Obligation (RO) for new solar PV capacity of 5MW and below is to be closed a year early on 1 April 2016.
This decision will also apply to additional capacity added to existing accredited stations that does not take it above 5MW in total installed capacity from that date.
As part of its changes to renewables subsidies that have also comprised cuts to the feed-in tariff, DECC will also introduce closure grace periods in line with those provided for solar PV projects above 5MW. This will be implemented on projects where preliminary accreditation or significant financial commitments were made on or before 22 July 2015.
The removal of grandfathering, which offers a fixed rate of support from the date of accreditation, has also been confirmed for projects in England and Wales at 5MW and below with an accreditation date from 23 July 2015 onwards.
The decision has sparked concern in the investor community amid claims that it sets a dangerous precedent, potentially damaging investor confidence in energy infrastructure.
Paul Barwell, chief executive of the Solar Trade Association, said: “Closing the RO for solar is not in the interests of bill payers when solar is soon to become the cheapest low carbon energy source. Following the Paris agreement, this needs rethinking.
“Removing the grandfathering guarantee makes no sense for solar – it’s the thin end of the wedge. If you invest £1million of capital into a solar project today, in 20 years time you have still invested £1million – it is a sunk cost. You cannot have the level of support changing over the lifetime of a project as investors won’t take the risk.”
Some projects will be exempt from the removal of grandfathering if they are able to demonstrate that they had made a significant financial on or before 22 July 2015.
The government will also hold a technology-specific banding review for solar PV in England and Wales, with a consultation of the proposed new bands launched today. The document proposes that both building mounted and ground mounted projects receive the same ROC support of 0.8MWh as according to DECC, ‘the evidence on their costs is not dissimilar enough to justify different ROC bands’.
Depending on the outcome of the consultation, the revised support band for new solar PV projects up to 5MW in size would be come into force from 1 June 2016.
This decision to close the RO for projects of 5MW and below follows the Government’s decision last year to close the RO for those bigger than 5MW in size.