Plans to change what households make from solar Feed-in Tariffs 'feels a breach of pro

WiserMiser

Scot_39 said:

Fixes last for 1-2 years - not up to 25.

Totally irrelevant.

Contracts don't evaporate over time.

If you own a freehold property would you be happy to be told it's no longer yours because you bought it 25 years ago?

QrizB

Scot_39 said:

Yes - and those contracts could even be illegal - if argued the result  75p/kWh as quoted above - over 10x Ofgems own latest summer 2025 day ahead supply rates (around 6-7p/kWh Aug /Sep) technically were to be found to be treatable as profiteering.

Threre's a bit of a false comparison in this thread. The generation payments - which for the earliest FITs can be around the value quoted above - are not intended as a payment for the electricity returned to the grid. They're payment over 20 or 25 years for the capital cost of installing the equipment.

Government could have chosen from 2011-2019 to fund this differently. And investors (not just householders but larger commercial organisations) could have decided to invest in renewable energy on the basis of these different funding arrangements. But we are where we are.

Scot_39 said:

But - and I havent seen the contracts - but if the QRizB post above is correct and the indexing is based on inflation+5% (or did that also change in 2012?)

and

The tariffs for solar PV were originally intended to provide a return of around 5% for well located installations 

That's a 5% return on investment, over the FIT duration, on the installation costs of the equipment.

The impact assessment from 2012, when FIT rates were first reduced, is here:

https://webarchive.nationalarchives.gov.uk/ukgwa/20121217150421/http://www.decc.gov.uk//assets/decc/Consultations/fits-review/4310-feedintariff-comprehensive-review-phase-1-impact.pdf

Paragraph 34 states:

The proposed tariffs set out in the consultation document aimed to provide an approximate 5% real rate of return for well located installations, the target return for FITs when the scheme started. The one exception is the tariff for installations up to 4kW, the scale most commonly used for domestic PV installations. The proposed tariff for this band was  intended to deliver an approximate 4.5% rate of return for a well located domestic PV installation.

Individuals and businesses made investment decisions based (either explicitly or implicitly) on the risks and returns that the UK Government offered under the FIT scheme. For them to decide after a decade that they don't like the terms of that scheme would be bizarre, particularly as the scheme is now closed and the costs to complete payments for the remaining duration can easily be calculated.

Scot_39

And you think the 6p market rates dont reflect other generators return on investment ? 

Doc_N

Scot_39 said:

And you think the 6p market rates dont reflect other generators return on investment ? 

That’s completely irrelevant. What’s at stake here is whether it’s acceptable for one party to a long term contract just to walk away from it. How would you feel if your bank decided it preferred to keep your money, rather than allow you to withdraw it?

Scot_39

Oh and as to your contracts are contracts line - ML wording suggests the govt does in fact expect contracts - even short term contracts - to be broken

"Having spoken to a senior member of the Government on energy bills since the Budget announcement, there is a clear expectation that suppliers will pass on this saving to people on fixes"

Lets see who is right or wrong come Apr.

QrizB

Scot_39 said:

And you think the 6p market rates dont reflect other generators return on investment ?

Returns on other investments, funded under different arrangements, are irrelevant.

If I'd chosen to build a CCGT I'd have based that decision on CCGT economics.

Scot_39 said:

Oh and as to your contracts are contracts line - ML wording suggests the govt does in fact expect contracts - even short term contracts - to be broken

Really? Because the para you have quoted:

Scot_39 said:

"Having spoken to a senior member of the Government on energy bills since the Budget announcement, there is a clear expectation that suppliers will pass on this saving to people on fixes"

A "clear expectation" suggests to me that there's nothing that Government can do if suppliers choose not to.

Qyburn

QrizB said:

https://webarchive.nationalarchives.gov.uk/ukgwa/20121217150421/http://www.decc.gov.uk//assets/decc/Consultations/fits-review/4310-feedintariff-comprehensive-review-phase-1-impact.pdf

Paragraph 34 states:

The proposed tariffs set out in the consultation document aimed to provide an approximate 5% real rate of return for well located installations, the target return for FITs when the scheme started. The one exception is the tariff for installations up to 4kW, the scale most commonly used for domestic PV installations. The proposed tariff for this band was  intended to deliver an approximate 4.5% rate of return for a well located domestic PV installation.

Noting that those "proposed tariffs" were roughly half those being paid to earlier installations. So at that time people were being paid a rate twice as high as needed to get that 5% real return.

QrizB

Qyburn said:

Noting that those "proposed tariffs" were roughly half those being paid to earlier installations. So at that time people were being paid a rate twice as high as needed to get that 5% real return.

When the rates were reduced, yes (that's why they were reduced).

When they were introduced, no.

Baldytyke88

Scot_39 said:

Fixes last for 1-2 years - not upto 25 if the above comments correct.

If you are referring to mortgages, my mortgage is fixed for 10 years.

I got my solar panels for free in 2014; but I believe the tariff was tied to RPI, pairing it with CPI would be 1% less