Financial incentives for
green energy could be cut, Antonio Fabrizio
writes.
Go deeper with GlobalData
Lessors of photovoltaics have
raised concerns that the feed-in tariffs supporting their business
may be reconsidered as early as this year.
A review due to take place in
April 2012 could be brought forward if there is higher than
expected take up of the scheme, the government said in its
Comprehensive Spending Review.
One lessor said: “I have
heard that the government view is that they have almost achieved in
terms of feed-in tariffs what they intended to do by
2012.
“In terms of photovoltaics
[PV], there has been an acceleration, so I expect PV will have
reduction in the months ahead.”
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By GlobalDataA reduction of 10% in feed-in
tariff rates is thought a possibility, mostly coming from PVs. Wind
turbines and anaerobic digestion units are thought unlikely to
suffer such a big cut.
The UK Department of Energy
and Climate Change confirmed that a review of the tariffs will
definitely take place in April 2012, but reserved the right to cut
the tariff rates earlier.
A spokesperson said: “The
government is committed to feed-in tariffs. The first review will
be in 2012, unless there is a real, sudden spike in
registrations.
“This is not expected, and
has not happened until now.”
However Steve Moore,
relationship manager for the UK branch of the Dutch ethical bank
Triodos, said the change could come sooner.
“The government had already
signalled that if significant numbers of larger projects are
deployed under the existing feed-in tariff regime more quickly than
expected, the review may be brought forward,” Moore
said.
“Our experience suggests that
it does take time to deploy commercial scale projects, and the
clock is already counting down to the next scheduled
review.”
Feed-in tariffs were
introduced in April 2010 to help the UK reach its target of 15%
renewable energy by 2020. They are paid to homeowners and
businesses which generate their own electricity through small-scale
green energy installations.
At the time, the Finance and
Leasing Association welcomed the scheme but cautioned that lenders
needed reasonable returns and residual values to make the business
attractive.
One concern is that any
reduction could turn deals from profitable into loss-making
arrangements if it is applied to them.
Another lessor, who asked not
to be named, said: “Even if the government doesn’t honour its
commitment to the tariffs, those who have already struck a deal
should continue to have the feed-in tariff at the same rate. There
cannot be a retrospective law change, so you couldn’t have a
situation where the new tariffs apply to an existing
project.”
Nonetheless, Moore continued
to consider feed-in tariffs schemes as attractive for
developers.
“Although the guaranteed
income reduces some of the risks associated with new developments,
the key factors which make a potential project attractive to
lenders remain the same,” he added.
“They include the use of established technology,
experienced contractors and a simple contract structure along with
a clear purpose, responsibilities and decision making within the
organisation behind the project.”
